Homoeconomicus '17

HOMOECONOMICUS EDITOR’s PICK

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p THE IRRATIONALITY OF RATIONALITY

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THE BLACKBOOK p OF BRAHMINISM

PHOTOGRAPHED BY SHIVAM BAPAT

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ECONOMICS p FOR DUMMIES

HOMOECONOMICUS III

CONTENTS

Editor’s note

RIGGED REVIEWS THE BLACKBOOK OF BRAHMINISM -Atharva Pandit

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ADULTERY -Ritika Raghunathan

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THE IRRATIONALITY OF RATIONALITY -Sharika Dhar

THE IMITATION GAME 6 -Smith Patel

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THE GREAT INDIAN E-COMMERCE -Apurva Tudekar

THE CONSTANT GARDENRER 8 -Aditya Sharma

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WATCH OUT FOR THE NEW BUDGET -Sushant Hegde

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FROM THE H.O.D’S DESK

PRICEYONIONIONALYSIS

PAPER MACHE

SHOULD THE DRAGON SHED HIS ARMOUR INDIA’s MISSING EMERGENCY MEDICAL OF CONTROL ?

SERVICES -Manas Ghokle 11 -Vasudha Ramakrishnan and Mokshda kaul 35 BOEING - A flight from war times to the present

TRIPPIN’ ON ECONOMICS ECONOMICS FOR DUMMIES -Rucha Bedekar LIQUIDITY VS. PROFITABILITY -Akanksha Bhende

-Gauri Iyer, Heer shah, Pritika Hirebet, Rujutha Thamanakr, Shreya Jaokar, Sumit Kamam 37 INDIAN AGRICULTURE- Major Challenges

16 -Swati Raju

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DISCUSSING INFLATION

17 -Arnav Deshpande

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CAPITALISM -Manpreet Singh

AGRICULTURAL CREDIT POLICY 20 -Manasvi Abhyankar

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GST -Sujay Mahadhik

CASHLESS INDIA A NEW BEGINING 22 -Apurva Bendre

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TRENDS IN FEMALE WORKFORCE PARTICIPATION -Diya Devare

FEATURE REPORT-Kindle me (?) not -Team Homoeconomicus

CREDITS

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EDITORS’ NOTE Alfred Marshal, the great 19th century economist, in his book “Principles of Economics’ has stated that “Economics is a study of mankind in the ordinary business of life”. This definiton is as true today as it was in 1890, when the first edition of his book was published.

So what does economics mean to our generation of students? It helps us to understand the world we live in and further propels us to become a more astute participant in the robust and ever changing world economic status. It teaches us to rationalise and reflect our thoughts into practiced and realistic segments. In this process it also ignites our inquisitive yearnings to observe and lead life more meaningfully.

As an economist, one has the power to protect any subject of issues in more ways than one and at times bring about consensus between two diverse factors through the power of reflection.

Always in tune with current trends and topics, this year we ponder upon the raging topic of growing preferences in ‘Reading devices’ amongst the young citizens of metropolitan Mumbai. Through this featurette we have attempted to highlight the options available in the market and preferred by consumers, the dependence of financial aspects on choice and furthermore the effect of technological adavancements on the same. Keeping in mind the curious quotient of this topic, we assure that it would instigate a debate in your next ‘Chai pe Charcha’ session !

Lastly we express our sincerest gratitude to the Department of Ecnomics, Ramnarain Ruia College, for giving us the experience and opportunity to put together this magazine. We further thank, Mrs. Aditi Abhyankar, H.O.D Economics Dept. , and the faculty comprising of Mrs. Varsha Malwade, Mrs. Pooja Thakur, Mr. Koustubh Joshi and Mrs. Bhakti Junnare for their guidance and motivation through this journey. We are also grateful for the endless support and co-operation from our Authors, their contributions to this magazine have been unique and exemplary.

We hope this 3rd edition of Homoeconomicus 2017, fuels your ‘joy of reading’ and helps broaden your horizon of knowledcge.

Editors’ In Chief Yashika Doshi Taneesha Iyangar 3

HOMOECONOMICUS III

FROM THE H.O.D’s DESK In the academic year 2016-17, the Department of Economics organised talks, seminars, conclave, industrial visits, the Eco-Fest, ELIXIR and many activities in association with various organisations. Our students won awards and prizes in many activities at inter college and University level.

The Dept. of Economics takes pride once again to bring out yet another edition of Homoecomomicus 2016-17. As usual the magazine is well edited along with the art work by a team of creative students. The speciality of this edition is that, not only the current students of Ruia college, faculty and students of neighbouring colleges, but some very senior alumnus of the department have contributed their research articles and papers as well. The topics covered are of varied nature covering, areas such as agriculture, education, the issue of demonetization and so on. I would like to express my Head of Deapartment heartfelt gratitude to all au(Economics) thors and creative artists for Ramnarain Ruia College, their valuable contributions to Associate Proffessor, the magazine.

Dr. Aditi Abhyankar

University of Mumbai.

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PHOTOGRAPHED BY SHIVAM BAPAT

“The opinionated editorials in this section will make yoiu think about your onions, the pricey ones”

HOMOECONOMICUS III

THE iRRATiONALITY OF RATIONALITY F

irst assumption: the consumer is rational. Ask any economics student in any part of the world and they can tell you how many times this assumption has been made for various theories. We always assume that the participants in the theory are “rational”, meaning, the consumer or the participant will take the expected route, because I guess that’s the only way of proving said theory. You assume that everyone does the expected deed and takes the expected decision. No chance for an illogical moment, nothing out of the norm. The conscious and intelligent mind is expected to be rational. This separates the intelligent and the insane. But why is this an assumption?

Year 2003, Kochi, Japan. Here, the Kochi Racetrack was on the brink of bankruptcy. The economic situation in Japan was pretty bad and this definitely did not help the racetrack. Racetrack PR Masashi Yoshida, and Koji Hashiguchi were making their final attempts to save the place. Their efforts were not bearing any decent results till Hashiguchi-san observed that there was a horse that lost in each and every race. Every single race the horse participated in ended in a loss. This horse’s name was Haru Urara, which meant “Glorious Spring” in Japanese. Haru was the all-time loser of derbies who wore a pink face mask with Hello Kitty print patches and stood out because of the bright colour. She worked hard.

There was not a single race where she wasn’t passionate; she was excited before and after each race and even posed for cameras when she went by them.

This actually made the whole situation even more bizarre. At the time of the bankruptcy scenario, Haru had already lost 88 matches. Yoshida-san wondered if a story about a recurring loser could actually be news. Would people bother reading about a loser?

He still gave it a try and this story got picked up by Dai Muneishi, a journalist in Kochi. The article’s title - “Haru Urara on an 88 Race Losing Strike”. Haru’s background of how she was found wandering on the race track mostly because she was an unwanted horse, to the fact that her owner Muneshi-san was taking care of her with the hope that she would win at least once, were a part of the article. The article was a sensation. People could relate to the story and

that’s what made it even more phenomenal.The racetrack did its own publicity and sent it around to more news outlets. It got picked up by the Mainichi newspaper which helped the story go national, leading to the “Haru Urara Boom”. By then Haru had already lost 90 races. The racetrack started filling up with journalists and Haru supporters. The derby racers’ wives even made Haru Urara merchandise - “Never Give Up”, that resounded well with the people. On November 30th, Haru came 3rd in a race. This created a national frenzy. Even the then Prime Minister Koizumi stated that he would like to see her win.The whole atmosphere of “If you keep trying, you can succeed” feeling was growing in the country. The racetrack even received a lot of stories of people feeling encouraged because of Haru. Muneshi-san got a call from from a person who said that he was thinking of committing suicide but after seeing Haru, he had decided to hang on. He said, “She must be a star of hope for the losers”. On December 14th, Haru finally had her 100th loss. But the true peak of the “Haru Urara Boom” came on March 22nd 2004 where Yutaka Take, one of the best jockeys in the nation with 3000 wins and a 3 time Japanese Derby winner had decided to ride Haru Urara for a race. He was in support of saving the Kochi racetrack and thought that would be some good help. People from all around the country came to see the match. The racetrack was chock-a-block. Could Haru Urara finally have her first win? Unfortunately, this isn’t a fairytale so, no.

She had her 101st loss instead. But the crowd had a completely different reaction. They were still excited and happy. Everyone cheered for Take-san and Haru and they took a victory lap around the racetrack.

Now this maybe an inspiring story but after all this, you wonder where the ‘economics part’ comes in. Well it’s what happens behind the scenesThe betting.

Bets of over $1 million were made on Haru Urara TO WIN. She kept losing but the racetrack kept winning. Now, as an economist or any ordinary consumer you wonder- “Wouldn’t a RATIONAL consumer not bet on a horse who always lost?”. The answer is simple – in theory, the racetrack 6

would have gotten bankrupt and nobody would have even bothered about a horse that always loses. But in reality, the racetrack is still working and everybody knows and loves Haru Urara till date. Understanding the fact economically just means understanding the concepts of utility, incentives, and their relationship.

Utility is usually defined as that abstract term which is more or less related to the aspect of satisfaction of the consumer with respect to consumption, whereas incentives are rewards that help in encouraging a person in performing a certain task or making a certain decision. Incentive mechanisms are the basics of a business and achieving that reward is basically an increase in your utility with respect to consuming with the reward earned after performing those services. So, in a betting, the incentive is the chance of winning an amount, which could be pretty large of course. This would provide one with some level of utility as their investment would have resulted in gain and this could help in increasing their consumption.

Haru Urara is a paradox to this utility-incentive relationship where there was no incentive – especially not relating to the financial gain of the consumer. People were betting on a horse whose track record was pretty well known. This case is like being told what questions would be asked in the exam but the student still studying all the chapters and topics. This got me thinking about an important dimension of economics, which may define the “so called” rationality of the consumer- PROBABILITY. Statistics is an old friend of Economics but what we don’t realize is that it’s that influential but indecisive friend who you don’t know how it’ll behave in different situations. So, as an economics student, when we learn statistics we always believe that tossing of an unbiased coin has 50-50 chances for each side of the coin. This working of probability is what we can observe in this case, that is, giving 50-50 chances to both winning and losing, while not concentrating on the previous results.

With this we can say that it didn’t matter whether Haru Urara won or lost because statistically, even though her track record would make you infer that she would lose, in a person’s mind there would be equal weightage given to both outcomes due to the “probability” of either result or ignoring the general fact that Haru Urara always lost. Observing this, where do you think this aspect of rationality stands?

Well, we could even say that people love to believe in miracles and this could take a completely different turn to psychology or philosophy. This just shows how inter-disciplinary the subject of economics is and how inter-twined all social sciences are. Now back to the concept of rationality,

the term is much more dynamic than we are led to believe and maybe it’s even more subjective than we have considered it to be. So let’s leave the term for each one of us to define in our own way. Maybe like what Friedrich Nietzsche thought of it, “In everything one thing is impossible: rationality”. So, the first assumption of reality is, “Everyone is rational in their own mind which could be irrational to others”.

References-ESPN Movie “The Shining Star of Losers” - Wikipedia SHARIKA DHAR : Hello!

There is not much to know about me except for my LOVE for 2 things- Origami and Reading! I read books, magazine, mangas (Japanese Comics) and I also have an unhealthy obsession with anything Japanese (disapproved by many!). When it comes to writing, my inspiration is Dad and I hope that one day I can be as good at it, as he was.I am currently doing my Masters in Economics at Mumbai University and hope that I can get a PhD in the same field.

THE UNKNOWN THEORIES The Lipstick Effect: There is an economic theory which states that during an economic calamity,people wouldn’t buy luxury articles but they will buy an expensive lipstick.It is also said that after the 9/11 attacks the lipstick sales had doubled.

The Khazzoom-Brookes Postulate: Economists Daniel Khazzoom and Leonard Brookes state that increased energy efficiency paradoxically leads to increased energy consumption.Since energy efficiency increases,it becomes cheaper and its use increases.

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HOMOECONOMICUS III

THE GREAT INDIAN

GRAPHIC BY HAVAMA MEMON

E-COMERCE

E

–commerce is certainly a new phenomenon in India. From Flipkart to Ola, Indians are slowly getting attuned to the e-way. Brick and mortar shops haven’t become a passe but these startups pose as a serious threat with its growing share in the market. As per the latest Morgan Stanley report, internet penetration is likely to grow from 32% in 2015 to 59% in 2020 which will lead to increase in online shoppers from 50 million to 320 million.

Though the e-commerce model has come under criticism on many fronts, one cannot discount the enormous benefits it has brought to the consumers.

Today e-commerce has penetrated in various sectors from clothing, electronics to groceries. It has made our life quite comfortable, saving some of our precious time which we usually spend in commute and finding the best bargain for the product. For example Myntra which was acquired by Flipkart, is the leading website for clothing and accessories with sales over a Billion USD in August 2016.Babajob.com has come as a boon for informal sector, which is highly neglected in India. It employs over 2 million electricians, maids, technicians, drivers and has a presence in many cities like Mumbai, Bengaluru, Jaipur, Ranchi.Its highlights are easy registeration, fixed amount for labour, timely payments, bonus for top performers and feedback from customers, training programmes for the workers. House hunting is always a nightmare for singles in India even today. However startups like CoHo, ZiftyHomes to name a few have made this task relatively simpler by offering facilities like free wifi, pool, gym, get togethers, well furnished homes and also promoting the idea of Co-living. Paytm has come as relief for the customers and small businesses like the paan walas who are using this e-wallet, especially in times of demonetisation. Indian women have always been nervous and uncomfortable with the idea of buying lingerie in shops and so sites like Zivame have come as a blessing. Numerous other startups have been able to make breakthrough from UrbanClap and Pepperfry for furniture shopping, to Ola for cab services. E-commerce has revolutionized the consumption pattern for Indian consumers. In recent times, it has been in news for mass layoffs, firing professionals without prior notice, delay in giving salaries. Flipkart reportedly laid off 1000 employees and Zomato fired around 300, this has exposed one of the dark side of these startups.

Many employees who joined these start ups as a break from monotony in their desk jobs in the traditional sectors, apparently regret quitting their jobs as they were novices and unaware of the work culture in the start ups like long work hours, no holidays and other perks associated with a regular corporate job. But these startups defend these layoffs saying that it is a part of growth for the company as they want to maintain efficiency as well as profitability. Doubts have also been raised over their aggressive pricing strategy followed by them as it is said to unsustainable in the long run. Ecommerce firms are already making losses with strategies like cash on delivery, hiring Bollywood stars to promote their startup, continuous discounts and marketing. Stock market analysts also fear the valuation bubble as Flipkart’s share price has gone down by 27% earlier this year.

It isn’t a complete bleak picture though as per Mint Indian ecommerce is likely to make profit by 2020.India is said to be the fastest growing ecommerce market, growing at an annual rate of 51% according to a joint ASSOCHAM-Forrester report with annual addition of 25 million internet users. With 100% FDI in ecommerce announced by the Government, these startups expect funding from foreign giants like Alibaba, SoftBank. Alibaba’s stake in Paytm has gone upto 40%.Even as reports of Amazon creating a dent into the business of leading Indian ecommerce firms like Snapdeal, 8

Flipkart, it has created healthy competition and scope for Indian ecommerce to grow in the coming years.

Department of Industrial Policy and Promotion recently came out with regulations which included definition of ecommerce, cap on the discounts offered, guidelines on marketplaces and FDI in ecommerce ensuring regulation and at the same time paying heed to the grievances raised by the traditional small scale industries and the Retailers Association.

India is an evolving market and ecommerce is the future. The Union Budget of 2017 has resonated this current mood. Governtment’s move to push for digitalisation, enhanced rurual connectivity with programmes like DigiGaon, BharatNet and tax rebates for the first three years for these startups are a few steps in this direction. Cashless India will also benefit from these startups. There are definite roadblocks with aggressive investment by leading global corporations posing a threat to the local ventures trying to make headway in the ecommerce market place, taxation notices to these startups, getting professionals on board, generating profit in the long run, and raising capital and so on. Inspite of these challenges, the future of Indian ecommerce is bright. India is witnessing urbanisation higher than ever before, the middle class is growing and today’s fast paced life values services more than the old structure of business.

Ecommerce is a platform for many new ideas and is open for innovation. It is a learning curve after all .A decade back online lending and borrowing to those needy businessmen would have been unimaginable but today it is becoming a reality in India. As time has become even more precious and with ecommerce offering convenience, reasonable prices, wide range of choices, comfort, efficiency...E-India is not far away!

Source:Economic Times (multiple editions) Livemint

APURVA TUDEKAR: I am a second year BA student, pursuing Economics in Ramnarain Ruia College. I wish to further pursue a career in policy making and research.I enjoy Reading fiction and classics, Writing and playing Sport.

I also enjoy Travelling and playing the Keyboard.

WATCH OUT FOR THE NEW BUDGET! “A much needed change from age old practices”

T

he year 2016 has seen two major game-changers for the Indian Economy. One, the passage of and President’s approval for the Constitutional Amendment of the GST (Goods and Service Tax) Bill and the second, the Demonetisation shock given by the Prime Minister of India.The outcomes of both these game-changers are still uncertain, and it may take another year to gauge them. But what the people of India are religiously tracking is the Bud-

get for the financial year 2017-2018 and what the Finance Minister has in store for the general public.

Is it going to be a more populous budget for all or a nothing - for – anyone budget?? What is certain is that this budget is going to be different in comparison to those that have been presented till date. One will notice 3 landmark changes in this year’s budget which are worth paying attention to.

Primarily, historic change is the “Marriage” (or ‘merg9

HOMOECONOMICUS III er’ to be more formal) of the Railway Budget with the General Budget.The 92-year-old tradition (initiated in a report of the Acworth Committee stating that the railway finance should be separated) will cease to exist. This was the recommendation of a committee led by Bibek Debroy, a Niti Aayog member. His explanation for this recommendation is that the Railway budget was more of a populist regime than a commercial exercise. The Railways will continue to maintain its distinct entity as a departmentally run commercial undertaking and will retain its functional autonomy and delegation of powers. The Railways will continue to meet all its revenue expenditures from its revenue receipts. So, what is the benefit of doing this and what are the issues?

On the positive side, folding the Railway budget into the General budget will lead to presentation of a unified budget, bringing the Railways to the centre stage and giving a holistic picture of the financial position of the Government. It’s a relief for the Railways as the revenue deficit and the capital expenditure of the Railways will be transferred to the Finance Ministry.

So, the massive deficit numbers will get support from the treasury coffins of the Finance Ministry to handle the additional burden of about Rs. 40,000 crore on account of the implementation of the 7th Pay Commission and the annual outgo of around Rs. 33,000 crore on subsidies of passenger services. In addition, the capital at charge of the Government, amounting to 2.27 lac crores, in the Balance sheet of Railways, will be wiped off, relaxing the dividend outgo of the Railways to the Government to the extent of Rs. 10,000 crores. Interestingly, there are other sectors like defence and petroleum which are allocated a higher expenditure compared to the Railways. Initially, when the two budgets were separated, it was because Railway budget was 85% of the Main budget, compared to it now being only 15% of the same.Thus, pragmatically, investing so much time and resources on the Railway budget does not seem logical and the need of the hour is a concomitant focus of addressing Railway’s structural requirements.

On the flip side, as all rail-related expenditures will be subsumed under the General budget, any fall in gross receipts or revenue of the Government will mean the finance ministry will curtail the allocations of rail expenditures as well. The expenditures may also be curtailed if the Finance Ministry plans for an austere policy of fiscal deficit. In addition, the Finance Minister may find it difficult to hike the passenger fares, keeping the vote bank in mind. This may have an adverse effect on the revenue expenditures and hurt modernization plans. The merger will make the Railway 10

just another department of the Government.

The second landmark change is the advancement of the presentation of the Budget by almost 3-4 weeks.

The budget, which was presented on the last date of February every year, will be preponed by a month, and will henceforth be presented in the month of January. For the up-coming Budget, the date is fixed at February 1, 2017, keeping the election schedule in mind.

The primary objective is to get the Budget constitutionally approved by the Parliament and President, which will help in disseminating the funds to the respective ministry before the financial year commences. This will eliminate the need for a “Vote-onaccount” budget approval, which at present happens

by May-end and is needed for expenditure to be incurred in the first two months of the upcoming financial year. It will assist in any major changes to be rolled out right at the beginning of the year. In contrast, the only worrying factor is whether the Parliament and the Standing committees, which scrutinize the expenditure, will have adequate time to discuss and approve the spending.

The third landmark change is the scrapping of the distinction of the Plan and Non-plan expenditure, which was pitched by a high-level committee headed by former RBI Governor C Rangarajan. Plan and Non-Plan expenditure will be replaced by Revenue and Capital Expenditure. The distinction between the Plan and Non-Plan expenditure was brought in when the country adopted the plan model of economic growth. Post the abolition of the Planning Commission (which played a big role in developing the Five Year Plans and allocating Plan expenditures), the relevance and efficacy of such a classification, is a big question mark. The plan expenditure, which is kept as a separate accounting classification, has lost its relevance which can be depicted with the help of numbers. 70-75% of the total expenditure is non-plan expenditure and 70% of the total plan expenditure is “planned revenue expenditure”.

With this change, the Niti Aayog will be the guiding force in the overall development priorities and reviewing the performance of the departments, while the Finance ministry will take the lead and decide on the allocation of financial expenditures. The Plan and Non-Plan bifurcation of expenditure has led to a fragmented view of resource allocation to various schemes, making it difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes. In addition, the bias in favor of Plan expen-

diture has led to neglecting expenditures on maintenance of assets. The new buckets – Revenue and Capital expenditure will simply distinguish on the basis of creation of asset. This “Golden Rule”, which is followed across the globe, is a simpler and a more practical approach.

Out of all the three decisions taken by the Cabinet on September 21, 2016, the first one is a major decision with the weighing scale slightly tilting towards the benefit side. This discontinuation of legacy will make the Railway activity in the General Budget a more commercial activity rather than filled with popular measures. The other two decisions are more of a cosmetic touch-up but are still essential and indispensable when it comes to expenditure planning and implementation. Not a game-changer compared to the two big ones which came forward in 2016, but still these landmark decisions break away from the former and erstwhile practice of the Budget presentation. Watch out for these changes in the upcoming Budget 2017-2018!

SHUSHANT HEGDE A Postgrauate student of the Department of Economics, University of Mumbai and a member of the Institute of Chartered Accountants of India. In the long run, I will be dead, but in the short run I want to use my "capabilities" to make a difference in the field of Economics, studying which gives me maximum utility!!

tion costs and increase productivity. This stimulated the agricultural production and generated successful results. Now for the Industrial sector, such a model of single and simple policy with promising results could not be adopted due to the complex nature and inter relations of the production activities, a cluster of policies based on greater flexibility, autonomy, and market involvement significantly improved the opportunities available to most enterprises and generated high rates of growth, and increased efficiency.

J

ust 2200 miles north-east of Mumbai exists the world’s second largest economy in terms of Nominal GDP and the world’s largest economy in terms of Purchasing power parity, China. Its economy, nicknamed the dragon, has been growing at an average of more than 10% for the last 3 decades. It is predicted to take over the leading spot from United States in the next 2 decades.

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GRAPHIC BY TANEESHA IYANGAR

How did China get SHOULD THE here?

DRAGON Flash back to 1978, China was just about to implement reforms its S H E D economic system.

Phase 1979-1993: HIS It had proposed to The Dragon soars.

ARMOUR OF implement the policy to Faced with economic collapse in CONTROL? decrease state control i.e. the the early 1960s, the government contract responsibility system of producsharply revised the immediate goals tion in agriculture. It was seen as a way for of the economy and devised a new set poor rural units in mountainous or arid areas of economic policies to replace those of the to increase their incomes. This system allowed indiGreat Leap Forward undertaken by Mao. The vidual farm families to work a piece of land for profit economic performance of the People’s Republic of in return for delivering a set amount of produce to China was poor in comparison with other East Asian the collective at a given price. This arrangement cre- countries, such as Japan, South Korea. The economy ated strong incentives for farmers to reduce produc- was riddled with huge inefficiencies and malinvest-

HOMOECONOMICUS III ments, and with Mao’s death, the Communist Party of China (CPC) leadership turned to market-oriented reforms to salvage the failing economy.

Economic reforms of this period began with Deng Xiaoping adopting the contracting out policy in agriculture. This move increased agricultural production, increased the living standards of hundreds of millions of farmers and stimulated rural industry.

Reforms implemented in urban industry were specifically aimed at increasing productivity. A dual-price system was introduced, in which state-owned industries were allowed to sell any production above the plan quota, and commodities were sold at both plan and market prices, allowing citizens to avoid the shortages of the Maoist era. Private businesses were allowed to operate for the first time since the Communist takeover, and they gradually began to make up a greater percentage of industrial output.

In the 1980s and through the late 1990s, Chinese workers were cheaply available, in the sense that their labor cost relative to productivity was much lower than that of most other countries. This helped industries achieve greater profits as their cost of production remained low.

In 1979, China adopted the “one-child policy”. This policy, coupled with social and economic changes had a noticeable impact on the fertility rate. China’s total fertility rate fell sharply. This rapid shift to lower birthrates created the “demographic dividend”. The rapid fall in fertility rate lead to a lesser quantum of “dependent” population. This boosted the general savings rate in the economy. Thus, large work force, low dependency ratio accompanied by a high savings rate was instrumental in driving the economy towards a higher economic growth. The savings rate in this period was roughly around 35-40% of the GDP. But this period was not accompanied by external imbalances.

The Savings behavior of the population till the late 80’s was in line with the regular age-saving profile.

Diagrammatically, it represented a hump, indicating that the middle aged population saved more than the younger and older ones.

Deng reopened the Shanghai Stock Exchange closed

by Mao 40 years earlier. Although the economy grew quickly during this period, economic troubles in the inefficient state sector increased. Heavy losses had to be made up by state revenues and acted as a drain upon the economy. Privatizations began to accelerate after 1992, and the private sector grew as a percentage of GDP. Phase 2: 1993 – late 2000’s. The Dragon’s Fire is 12

exposed to the world.

The most prominent event that took place during this period was the joining of China to the WTO. China had to drop many trade barriers. Business climate improved. But government policies favoured private firms and State-Owned Enterprises (SOE) over households. Therefore, most profits got accumulated with the firms or were taken away by the government. This gain was not reflected in social welfare spending. This created great upsurge in Aggregate Savings. The imbalance further worsened by rise in household savings, structural shifts in labor market, incomplete welfare reforms & demographic changes. Ill functioning financial system of china failed to capitalise on this increased savings and channelling it to high return investment. Thus, Excess savings became huge foreign exchange reserves.

The late 1990s brought institutional reforms in China’s labor markets. The demographic transition had now reduced that what used to be a huge amount of slack in labor supply, the “under pricing” of Chinese labor appears to be coming to an end. China was on the verge of becoming a middle-wage country. Wages were rising faster than labor productivity, particularly in labor-intensive exporting industries.

During 1993, output and prices were accelerating, investment outside the state budget was soaring, and economic expansion was fuelled by the introduction of more than 200 special economic zones (SEZs) by 2006 and the influx of foreign capital that the SEZs facilitated. The government approved additional long-term reforms aimed at giving still more play to market-oriented institutions and at strengthening central control over the financial system; state enterprises would continue to dominate many key industries in what was now termed a “socialist market economy”.

The Asian financial crisis affected China at the margin, mainly through decreased foreign direct investment and a sharp drop in the growth of its exports. However, China had huge reserves, a currency that was not freely convertible, and capital inflows that consisted overwhelmingly of long-term investment. For these reasons it remained largely insulated from the regional crisis and its commitment not to devalue had been a major stabilizing factor for the region. However, China faced slowing growth and rising unemployment based on internal problems, including a financial system burdened by huge amounts of bad loans, and massive layoffs stemming from aggressive efforts to reform state-owned enterprises (SOEs).

In 1997 and 1998, large-scale privatization occurred, in which all state enterprises, except a few

large monopolies, were liquidated and their assets sold to private investors. Between 2001 and 2004, the number of state-owned enterprises decreased by 48 percent. These reforms were dramatic, with millions of state-owned workers being laid off and moving to jobs in the private sector. At the same time, the government started to allow large-scale migration of rural workers to cities With these reforms, the private sector became a prominent player in the labor market, with private sector employment as a proportion of total urban employment rising from literally nothing in the early 1980s to about 80%.

This period saw corporate investment to increase in the late 1990’s which gradually declined at a very slow pace and was then seen dabbling around 30%. Investments by households and government were observed to have increased in small proportions.

The late 90’s saw a dip in the savings by the household sector but an equal rise in savings by the corporate sector. Both these sectors’ savings have then gradually increased and were estimated to be around 20-25% each. The Governmental saving increased around 5% to 10%. China had kept the exchange rate stable during this period and saw moderate trade surpluses when the nominal exchange rate of renminbi to the dollar increased by 30%. However, the 2005-06 jump in foreign exchange reserves helped China to appreciate the renminbi by 2.1%.

Phase 3 2005-Present:The cracks under the Dragon’s armour.

2005 saw the reversal of some of the reforms proposed by Deng. The government adopted more egalitarian and populist policies. Social and economic indicators have improved since various recent reforms were launched, but rising inequality is evident between the more highly developed coastal provinces and the less developed, poorer inland regions.

China’s current state now more or less implies a slowdown from the era of double digit growth for more than 3 decades. Due to its attempts at artificially keeping the economy upward moving, the cracks in its structures are now very visible. Differential interest rates to the SOE’s and the Private firms only made the private firms stronger. The rising shadow of the under-performance of the SOE’s, their incompetence has hampered China’s growth.

Many decisions like disallowing domestic private firms to invest in certain industries but allowing FDI in those industries is not helping inculcate and improve domestic demand.

Although recent events like the stock market shake down may have had a considerable impact on the Chinese economy, it is far from slowing down or on the path of downhill. Chinese private sector continues to be performing magnificently. It has more than 60% of private sector shares in fixed assets.

Even ancient evidences have showcased that it is the private sector and not the state Capitalism that has been the driver of economic growth for China. China has been accused many times for copying technology and has been identified as a hub of cheap technology.

But the picture is changing now with firms investing deep in research and technology. It has opened a new world of opportunities for them.

China is embracing innovation. Its manufacturers are second to none. They’re now targeting the rising Chinese middle class. China until now has only focussed on domestic investment and foreign demand. Now with the rising middle class, it has found a new dynamic market.

But there needs to happen reforms of the state owned sector and curtailing it privileges so that the private sector can freely compete with it.

Another point that needs addressing is the growing trade imbalances which we briefly noticed in the extract until now. The rising aggregate savings rate has been influential only marginally in creating the trade imbalance. China had planned for a balanced current account during 2006 – 2010. But it was caught off guard with the exploding external imbalances as it was not able to channel it into high return investment from small and medium enterprises. One of the main reasons was the intervention in Exchange rate by the Chinese government. But in spite of the currency appreciating against the dollar, the trade surpluses have continued to grow.Thus, exchange rate alone cannot be the driving force behind the rising external imbalances.

Chinese outward FDI is attracted to large markets, and to countries with a combination of large natural resources and poor institutions. Disaggregation shows that the former effect is related to OECD countries, whereas the latter interaction effect holds for non-OECD countries.

Conclusion: Was going reverse on Gǎigé kāifàng (“Reform and opening-up”) a smart move?

Going reverse on privatization may have only helped fixed temporary cracks, but if China wishes to continue growing at the pace it expects, then it is going to have to actually open up its doors to the rest of the world. It needs to understand that it cannot enjoy the benefits of a large economy at its own

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HOMOECONOMICUS III terms and conditions.

It wishes to create the Yuan as the new global reserve currency, but with its financial system still so shady, private players/government are going to be reluctant to buy those bonds.

What China needs to do on a priority basis is a few basic reforms that are truly liberal.

For eg. Rebalancing its trade imbalances, shifting composition of spending from investment to education and research, reviewing population control policy, reduction in import duty, removal of preferential policies towards the SOE’s etc.

This will truly set its pace as a global economic force for decades to come.

MANAS GHOKLE is a student of Meghnad Desai Academy of Economics and is currently interning with RBL bank.He wishes to be a Corporate Economist someday. An avid trekker and a riding enthusiast, he spends his free time exploring new places. Also, he tries to be funny (and even with all the luck in the world, it just doesn’t seem to come to him).

EDUCATION IN INDIA “A child must be taught how to think, not what to think “ –Margaret Mead In the past few years India has risen to be one of the most promising countries with respect to economic growth and development but a few things for our country have simply been a hit and a miss. As of 2016, the literacy rate of India was74.04%. Despite government’s attempts to make education a fundamental right under our constitution, opening more and more government schools to educate children free of cost up to the age of fourteen, not everyone is able to reap the benefits. According to surveys, every one out of four teachers of government elementary schools is never present. Government spends 80% of the education expenditure on the salary of the teachers, yet the efforts aren’t reflected in the results.

The most important issue is that the fundamental right to education is supposed to solve the problems of the financially weaker section of the society and decrease the number of the financially weak families in turn leading to development of our country in every sector. But that is simply not the case. The quality of education imparted by government elementary schools is unfathomably low and it isn’t able to build a solid foundation for the upcoming years of a child’s life. Moreover what creates ambiguity is the presence of different curriculums for students of the same age. The presence of different curriculum offered by the central government, the state governments and other education boards simply cannot compete with each other. Some curriculums simply cover the basic necessary concepts whereas the other curriculums offer a more concentrated and technical base to the students. Providing all students with the same strong and application based curriculum would create a fair competition for all the students enabling them to be equally prepared.

The idea of studying abroad is quite attractive to Indian students due to a lot of reasons. A few of these reasons being a more application and research based curriculum, degree from a world renowned institution, the lifestyle of a developed country and the sense of independence that one gets away from home. Indian students especially the ones belonging to a middle class family aspire to study abroad for their bachelors, masters or doctoral degree. The undergraduate courses in our country need a more research based approach enforcing the students to apply the studied concepts right from the undergraduate level. Research based approach will reduce our country’s dependence on other countries and will lead to more innovation as different minds think differently. Research challenges the thinking ability and promotes creativity in a person such a curriculum will be not only be at par with the renowned universities abroad but will also provide more ground for innovation.

Education not only shapes bright minds but it also frees the poor from shackles of poverty. Right education system can uplift the standard of living of millions of families and can lead to development of a nation. What we need is transparency in our system to enable the government to reap positive results. We require a more uniform and a well structured curriculum to enhance our education system.

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“Sure, we may be amatuers, but we know funda when we see it”

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HOMOECONOMICUS III

R

ajasya mulam Artham: Economics is the base of any country. This phrase by Chanakya in his great work, Arthashastra makes the crux of Economics, simply stating that the State cannot function without a strong Economic policy.

Honestly, the only experience I had with Economics was 2 months ago, when the Economics Times which came with the main paper.

I would swiftly move to the main paper or the other supplements without a second glance. A big mistake, as I now realize. I was from the Science stream and had no inkling as to what the subject was all about. So naturally during the first two lectures at College, I was 6 feet under water, struggling to keep my head up and keep breathing. Words like ‘Supply’, ‘Demand’, ‘Marginal Utility’ and ‘Commodities’ were Latin to me. To make it worse, my classmates spoke Latin really well.

I was lost and clueless. So I decided to be brave and started read-

ing the HSC Textbooks, and went into a deep sleep by the end of the first page. But, I attended classes religiously. Heard what the teachers said and also what the fellow students said. And then it struck me: Take everything literally. Stick to the main word and the simplest meaning that you can find! And so it started.

I tackled the ‘Law of Demand’. It was simple. The new Iphone was recently released. The cost is sky high. So, the number of people willing to buy the Iphone 7 at the given rate is low. So the demand or ‘want’ for the Iphone is low due to the cost. But a few months down the line when Apple reduces the rate, the demand will rise. More number of people will buy the new phone due to the reduction in the cost. Simply put “When the price increases, demand decreases. Price decreases, demand increases” There are 10 Basic Principles of Economics which I will try to explain as plainly as I can. The 1st states: ‘Individuals face trade-offs’.

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It means that people have to make a conscious decision between two equally lucrative things. For example: Your phone is old and you want to buy a new one, either the Motorola phone or the Samsung phone. Now the dilemma you face while making the decision here is called a ‘Trade-Off’. Suppose you choose the Motorola phone which has a better camera and battery than the Samsung one. But doing so, you will be giving up on a faster RAM which Samsung has. So the cost or value of selecting Motorola over Samsung is the RAM, which you gave up. This is called the ‘Opportunity Cost’. This is the 2nd principle. Now you have fixed budget and hence you choose a phone within that budget like a rational individual would. You will think of the benefits the phone has before you purchase it. This is the 3rd Principle: Thinking on the Margin.

Suppose you have exams coming up and your parents tell you if you score above 90% they will buy you the new Iphone.This is an incentive

DOODLE BY HAVAMA MEMON

ECONOMICS FOR DUMMIES

for you to do better in the exams.

This is the 4th Principle: People respond to incentives. Now you have your old phone. You can sell it online and make some money while another man can buy your old phone at a much lower cost than the Market Rate. Here we see the 5th Principle:Trade benefits individuals and nations. Nations also carry out International Trade like the UAE trades oil to the USA in exchange of some services that the USA provides. Now you want to buy the phone. You can either shop online or go to a place like Croma. Here you can compare the costs and make an informed decision. These are Markets. The 6th principle states: Markets are a good way to organize economic activity. Now Croma or Flipkart can work because they have the support of the Government. The government has policies which protect their interests and the client’s interests too. This is the 7th: Government can improve market outcomes.

The 8th Principle is: A country’s standard of living depends on its ability to produce goods and services. This is the base of international trade. A country like UAE has survived on oil trade to the

world. Since Oil is an essential good or ‘Commodity’ UAE has made a lot of money due to the trade of Oil. Thus, the Standard of living in UAE is better than a country like Sri Lanka which thrives on tourism mostly.

The 9th Principle states: The price rises when the Government prints too much money. This means that at times to show a growth in their economies to entice investors, the Government ‘pumps in money’.

The Government orders for more money to be printed. When this happens, everyone gets more money in hand and they start spending more. When the spending increases, the cost of everything, right from newspapers to the Iphone that you want, increases suddenly.

This is the cause of ‘INFLATION’.

The recent hike in the Toor Daal price is an example of Inflation.

The last Principle states: Society faces a tradeoff between Inflation and Unemployment.When there is a period of rapid price hike of an essential commodity like sugar or rice, the people have no option but to spend more. The owner of the sugar mill will make profits during this period and thus, he can afford hiring more people to make more sugar. This increases the quantity

LIQUIDITY

s of October 2016 there are 26 public sector banks, 25 private sector banks and 43 foreign banks in India. The Banking system of any country is considered to be the backbone for its growth and prosperity. It strives to fulfill the objectives of Liquidity, Profitability and Safety. Liquidity is the gauge of a bank’s capacity to quickly convert assets into cash in case

Economics is a science in itself.

One needs to read, understand, apply but most of all, enjoy the learning curve. It took me weeks to understand and grasp the concepts I’ve written about. It was a daunting task, but a really informative one.

RUCHA BEDEKAR: I am a First year Economics student.

Having done my H.S.C in science, this is my first experience with Economics. I am fond of writing, poetry and theatre. For me, Economics is not about reading books and explaining theories, but to understand and experience the economics Hidden in everyday life.

of contingencies. The term Liquidity is ‘the state of having enough money or assets to pay any money that is owed’.

Profitability refers to the situation whereby a company or an entity is earning profit. The state of profit is achieved when a company earns more than what it spends. When the goals of Liquidity and Profitability are fulfilled the third important objective of safety can be achieved. Maintaining high amount of funds in liquid form makes profitability unachievable for the banks. Likewise, eyeing high returns from the utilization of all funds available affects the liquidity aspect of the bank. Thus, liquidity and profitability are two desirable goals with contradictory features. The Asset Liability Management (ALM) is the basis for measuring the market risk of a bank. All assets and liabilities of a bank are categorized into 8 maturity buckets as per their maturity profile.

V S PROFITABILITY

A

of sugar produced and also gives employment. But, the same mill owner will start firing people once the cost of sugar reduces to make ends meet. The same principle applies to big companies too.

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HOMOECONOMICUS III

Fig. 1.1 Graph 1.1 Liquidity of commercial banks is measured in terms of the liquidity coverage ratio, which indicates the highly liquid assets held by the commercial banks to meet the short term obligations. To check on the liquidity of the commercial banks, the Narsimham Committee in 1998 under financial sector reforms introduced the Liquidity Adjustment Facility (LAF). To maintain an LAF balance RBI used instruments like the CRR, OMO and market stabilization schemes (MSS). LAF is operated through daily repo and reverse repo transactions i.e. auctions to meet the liquidity requirements of the system, by injecting and absorbing liquidity. Financial Ratios like Working capital ratio is used to estimate the liquidity position of a commercial bank.Working capital ratio is the relative proportion of a bank’s current assets to its curGraph: 1.2 rent liabilities. Bank deposits constitute an important Source: http://www.slideshare.net/iimjobs/india-banksource of funds which are used for the purpose of ing-sector-report-april-2014 lending. The nature, duration and size of public deposits determine the amount of liquidity that a bank is required to maintain.

Fig. 1.2

The two most significant measures of bank profitability are Return on Assets (ROA) which is the percentage of profit earned by a bank in relation to its overall resources and Return on Equity (ROE) which is the bank’s ability to generate profits from its shareholders’ investment.

Graph 1.3 Source: http://www.slideshare.net/iimjobs/india-banking-sector-report-april-2014 However, the bank can never be run for the purpose of making profit alone. Thus, under Priority Sector Lending, the RBI issues guidelines to mandatorily 18

spend 40% of their loans onto agriculture and allied activities, micro and small enterprises, housing for the poor and credit for education. As suggested by the RBI Annual Report in the fiscal year 2015-16 the private sector exceeded their priority sector lending, the public sector just managed to meet their target whereas the foreign banks had the worst performance. Another important factor that affects the profitability of a bank is the level of NPA (non performing assets), there is an inverse relation between the level of NPAs and the bank’s profitability. Gross NPA is indicative of the quality of loans made by a bank while Net NPA shows the actual burden that is

(USD Billion) were State Bank of India, HDFC, PNB bank, Bank of Baroda, Canara Bank and Bank of India respectively. The top five private sector banks by Net Profit (USD Billion) are ICICI bank followed by HDFC bank, Axis bank, Stand Chart IDR and Kotak Mahindra bank. The top five foreign banks by Net Profit (USD Billion) are Standard Chartered bank followed by Citi bank, HSBC, Deutsche bank and JP Morgan chase bank.

Fig. 1.4 Source: Source: http://www.slideshare.net/iimjobs/india-banking-sector-report-april-2014 A comprehensive research was undertaken by Urmila Bharti and Surender Singh on ‘Liquidity and Profitability Analysis of Commercial Banks in India – A Comparative Study’ which evaluated the performance of different groups of banks viz. public, private and foreign bank groups in India on the basis of eleven financial ratios.These ratios were further categorized into liquidity and profitability ratios. This study conducted from a period of 2005-06 to 2011-12 revealed that the liquidity and profitability position of the public sector banks declined while that of the other two groups improved.

A more recent and an extensive research was done

by P.Sheela and Tejaswini Bastray wherein GAP analysis technique was used to indicate the performances of ICICI Bank and Union bank of India from a period of 2009- 2014. This study revealed that though both the banks were performing satisfactorily Union bank of India was earning more profit with a good Asset Liability Management Strategy. Thus, it is a sound Asset Liability Management Strategy that transfers security and stability to a bank.

Thus, every bank aims at earning profit for providing fair returns to its shareholders by investing in assets that accrue maximum returns. However these assets may not be easily convertible into cash. Since Liquidity too is an important aim, the bank either maintains a fair amount of liquid assets or invests in assets that are easily convertible into cash. In such a manner a bank tries to strike the right balances between the two most desirable but contradictory goals of Liquid-

to be borne by a bank.

Graph: 1.4 Source: http://www.rbi.org.in Thus from the graph shown above, it can be inferred that the Net NPAs of the public sector banks has been declining since 2001 until 2007 after which it shows a rising trend again. The rising level of NPA in case of private and foreign sector banks is because of their lending to non-priority sectors which were largely affected by the global financial crisis.

Fig: 1.3 Source:http://www.slideshare.net/iimjobs/india-banking-sector-report-april-2014 Thus, it can be concluded that the Indian banking sector is growing at a tremendous pace. There has been a rise in the overall amount of deposits, credit offtake; there has been a decline in the overall NPA’s. In 2014, the top five public sector banks by Net Profit 19

HOMOECONOMICUS III ity and Profitability. This is referred to as a trade-off between bank liquidity and bank profitability.

References: ‘Liquidity and Profitability Analysis of Commercial Banks in India – A Com-

parative Study’, a report by Urmila Bharti1*, Surender Singh2 1*Faculty of Commerce, Zakir Husain P. G. Evening College, New Delhi (Delhi), India; urmi_janol5@yahoo.co.in 2 Faculty of Commerce, P.G.D.A.V. College (Morning), New Delhi (Delhi).

‘Indian Financial System’ book by Dr. S.B Deodhar and Aditi A. Abhyankar ‘Liquidity Operations by RBI’ by Newsroom 24x7 ‘Asset-Liability-Management– A Comparative Study of a Public and Private Sector Bank’ a report by P.Sheela Professor, Dept of Finance, GITAM Institute of Management- GITAM University Tejaswini Bastray Research Scholar, GITAM Institute of Management- GITAM University ‘Comparative Analysis of NPA’s of Public, Private and Foreign Banks’ a report

by Gaurav S. Godwani ‘How to calculate bank’s liquidity position’ an article by Kathy Adams McIntosh.

Websites: http://www.informaticsjournals .com/index.php/gjeis/ar ticle/viewFile/3058/2142 https://newsroom24x7.com/liquidity-operations-by-rbi/ https://www.rbi.org.in/scripts/PublicationsView.aspx?id=14331 http://www.ibef.org/industry/banking-india.aspx https://www.rbi.org.in/scripts/PublicationsView.aspx?id=17181 http://mrunal.org/2013/03/economy-liquidity-adjustment-facility-laf-margin-

al-standing-facility-msf-repo-reverse-repo-slr-crr-neft-rgts-ndtl-meaning-explained.html http://irjbm.org/irjbm2013/jan2015/paper6.pdf http://www.slideshare.net/guddugodwani1/comparative-analysis-of-non-performing-assets-of-public-sector-private-sector-foreign-banks http://www.slideshare.net/pankajbaid17/asset-liability-management-in-banks http://economictimes.indiatimes.com/industry/banking/finance/banking/ private-sector-banks-exceed-priority-sector-target-foreign-banks-lag/articleshow/53912839.cms http://www.slideshare.net/iimjobs/india-banking-sector-report-april-2014 http://thefinancebase.com/calculate-banks-liquidity-position-1938.html

AKANKSHA MADHURI ABHIJEET BHENDE: Student SYBA Economics, Ramnarain Ruia College.

A core Egalitarian at heart. Interested in Economic Research. Passionate about Rifle Shooting.

Would love to engage in a conversation with you here, akanksha.bhende@gmail.com

A CPITALISM

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A THREAT TO DEMOCRACY?

n today’s world, one hears about all the things which help mankind to live a smooth life complete with all essential comforts.World over we learn about Inventions, Economy and Politics amongst other things. But there is one word we hear often, but don’t think about enough -“Capitalism”. It is that force which drives our daily routine and yet we remain unaware about it. Right from our childhood, we are taught that, we live in a society which is governed by the will of the people implemented by a Government, which is elected by the people and for the people and that this is termed as Democracy. But in reality the world is not a democratic place, that is, except the government. For e.g. An Office governed by bosses, A home governed by parents who have “veto power” in most matters and so on. In fact today the world is indirectly driven and controlled more by Capitalism, than the society we have supposedly elected. Is capitalism a problem or the solution to society? Let’s find out?

Earlier the crises were much simpler to understand than today. Almost 400 years ago there problems of hunger, growing population leading to a deficit of food during natural calamities & war. However, today 20

an adverse problem is that there is food and yet the power to buy this food is low. The ironic situation of stores filled with food but met with beggars outside their doors is common sight. So we openly observe there exists fault in today’s economy. In his book, ‘An Enquiry Into the Nature and Causes of Wealth of Nations’, Adam Smith theorized that within the given stable system, the producers would respond to incentives by specializing in their product. He suggested that the market should work in “LAISSEZ-FAIRE” policy, as part of which the variables should be market determined, where its system should be devoid of interference from the central authority or in simpler words there should be complete abstention of government from the role of market. These conditions, he argued, would define a ‘free’ market.

As further thinking on the idea of free market progressed, the great Philosopher Karl Marx too argued that “private ownership of the means of production enriches capitalists at the expense of labour”. He also said that the capitalism leads to inequality and exploits labour. In simple terms capitalism is the production of profit in private hands. Marx described this philosophy as “product-money-product’’. But in truth,

a capitalist, works the other way around i.e.“money-product-money”. Thus every capitalist aims to make more money out of money that was initially invested.

Capitalism takes different forms depending on the nature and flexibility of the government, for e.g. Russia experienced ‘Vampire Capitalism’ that started after 1990, in which the entrepreneurs performed all their underground economy work by paying bribe to the government officials and other unfair means. In China, there exists ‘State capitalism’ where a country is governed by a communist government which takes socialistic form of capitalism i.e., the state is the king and the entrepreneurs, their slaves. In contrast, India has the state and capitalist working together in same market. In the case of USA and UK, the government interferes least in capitalist model.

Over the years capitalism has changed its form drastically, where it is challenging the differential structure of the society as well as the government. A prime example, is the oil crisis of 1973 where oil prices went up and business had to decide between shutting down and cutting the jobs teamed with reducing wages of the labourers, thus keeping the their profits intact. This lead to a new way in which the capitalists saw the market before and after the crisis. Now the capitalism started, use of capital as a weapon to push their profits and further capture the market by taking up the businesses of products which were basic necessities of the society (For E.g. Water in Bolivia, Health in USA, and Education in Sweden). As a result, now capitalists understood that if they want to survive even in a crises situation, they would need to regulate the market through the elected government, which meant they would require to lobby the government. This scenario occurred during the 1980’s in USA, when a group of capitalists lobbied with the government to trim down the regulations so that they can work freely and have higher profits.

This dangerous form of capitalism came to be known as “Crony Capitalism”.

The best product of crony capitalism was the creation of EU (European Union). The politicians of the EU countries took the credit for this union but this was, indirectly the creation of automobile capitalists in European countries to compete against the threat of a growing industry in East Asia. So by forming the EU and having common monetary laws, import-export structure etc., they could move goods and services freely amongst themselves.

Today the world faces mainly three crises, “Economy, Ecology and Energy”. Hence, we need to make sure that society owns a strong democracy rather than having to depend on individual strength. It is rightly 21

said by Amory Lovins that,“The Markets make a good servant but a bad master and a worse religion.” It should be noted that the foundation of democracy should be sturdy, so as to enable the correct form of capitalism to exist in society. Democracy and capitalism combined in an adequate manner would lead to a society wherein the production benefits the society rather than bringing exploitation down upon it.

Conclusion: We need to realize, today, that the economy is not independent. It has become the slave of some people who use money to drive the outcome of their choice and lead society to become dependent on money and power. It’s time we restore the market to a place where it belongs to-“the people”. Democracy and equality should be the key aim of the government instead of becoming a slave to Crony capitalism. It should also be noted that, the society will only function properly when the world makes a balance between the Capitalism and Democracy. The society should possess a framework that is strong enough to curb the capitalists from working beyond that path of tunnel (Just like a stealthy snake). Only then will we be, least prone to a crises.

MANPREET SINGH: I am basically a simple, adjusting and fun loving person, whom others consider as sincere and friendly too. For me, strength is life and weakness is death. Only thing in life I want to achieve is to be an economist.

DID YOU KNOW? As kids we have grown up watching our beloved Mickey Mouse,Donald Duck.Here are some fun facts about Disney: 1) If you happen to send Mickey and Minnie Mouse an invitation to your wedding they’ll send you back an autographed photo and a ‘Just Married’ badge. If you send Cinderella and Prince Charming, you’ll get an autographed congratulatory certificate.

2) It’s rumoured that Walt Disney had a phobia of mice.It is a fact that his big-eared creation was named ‘Mortimer’, until his wife persuaded him that ‘Mickey’ had a better ring to it.

HOMOECONOMICUS III

GST WHO GAINS WHAT?

GST officially known as ‘The Constitution (One Hundred and twenty second Amendment)Bill, 2014’, proposes a national Value added Tax to be implemented in India from 1 July 2017.The basic concept of GST is that the consumer will pay the final tax but an efficient input tax credit system ensures that there is no cascading of taxes. GST is levied only on the value-addedat every stage of production.

Now the difference between the VAT and GST implementation is that the VAT regulations and rates generally vary across states. There is a tendency, as has been observed, that states may resort to undercutting of rates to attract more investors. This generally leads to a loss of revenue to both the state and center. GST would introduce uniform taxation laws across states and different sectors.

Model of GST?

In India, Dual model of GST will be applicable wherein both center and state would be able to levy GST just like Brazil and Canada. 13th finance commission recommended a rate of 12%. State says they will not settle for anything below 15%. However, government would settlebetween 14%-16%.

Who gains what?

Aam Aadmi: Many goods could get cheaper. There could be more jobs. Automobiles and other such goods and services could become affordable. Economy: GDP could get up to 2%-point boost. More competitive manufacturing could spur Make in India. Exports could gain a competitive edge. Employment generation may get a lift. Businesses: Drastic reduction in logistics costs. Lower incidence of taxes on goods produced. More protection from imports. Lower tax burden, fewer compliance issues. Government: Revenue buoyancy from lower evasion. Easier administration of tax. Fewer tax disputes.

Why are states like Maharashtra, Haryana, Punjab are Unhappy?

The replacement of the existing taxes with the GST will lead to a revenue loss for the states.The states want compensation for this and the matter is how they will be compensated. So, there are efforts to arrive at a formula that is acceptable to the states.

Why There is Fierce Opposition?

Congress is doing what BJP did when Congress wanted to pass the Bill. So, it is political. States may lose autonomy to change their tax rates. There will still be tax in the name of Additional Tax @ 1% for Inter-state movement of goods which is against the spirit of GST. Manufacturing states would lose big revenue.

GST is clearly a long-term strategy, it would lead to a higher output, more employment opportunities, and economic inclusion. Initially however, it is likely cause high inflation rates, administrative costs, and face stiff oppositions from states due to loss of autonomy.

-SUJAY SANJAY MAHADIK, SE(IT), MITCOE, Pune.

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RIGGED REVIEWS

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PHOTOGRAPHED BY AARON BURDEN

“Catch your Reviews on Movies, books , public lectures and people”

HOMOECONOMICUS III f the purpose of Literature is to weave into words the society in all its evils and glory, and if the purpose of Literature is to make the reader aware that the society they live in, that the muck that they call their social dynamics is in fact composed of several layers of apathy, and that they are living a presumably comfortable life which is, in fact, constructed on the skeletons of injustice, then that purpose has been fully served in Poisoned Bread, a towering anthology of poems, short stories, memoirs and essays written over the decades by various Dalit writers in Maharashtra- where the venom of caste was perhaps at its most atrocious- and brought together by Arjun Dangle.

First published in 1992, this was the first such anthology bringing together various facets of writing from the oppressed and ignored part of the society, which is saying something considering the fact that by 90’s the revolutionary Dalit Panther movement had long since faded and the assent of the Hindutva poster boy, Bal Thackeray, was almost complete.

These were the years of social turmoil and the years when a the stamp of justification was engraved upon movements rallying forward the cause of upper class and majority class dominance over the society- either the Babri Masjid way or the anti-Mandal way. It was, therefore, a crucial year, and Poisoned Bread was published in this rather eventful period- and the book was, perhaps, meant to create a silent, literary revolution in its own way, though it unfortunately remained to fulfill that ambition.

That said, however, Poisoned Bread is not a social book, which is to say that it is not a book brought out in order to create a social consensus- the anthology does not seek to make the reader aware of the faulty social mechanism which used to and still governs the idea of the Indian society. This, I presume, is what puts it on a ground where the power of this collection is unshakable- for it believes that Literature is equal, that Literature with that capital ‘L’ is the ultimate resting place for a mind tormented by the injustice being flung upon it, day after day, night a f t e r night,

I

year after year and decade after decade.

It would be, also, unfair to drag an emotional expanse while examining this book, for Poisoned Bread is devoid, alienated, so to speak, from the sentiments and emotions that govern an individual- the book, as a living, breathing creature, seems to have zero emotions.

It only has a blank face, a face which has been spit upon and mocked upon; slapped upon and slashed upon- a face which has suffered, and which has learnt to stare blankly at everything being said and done.

But it has a soul- its pages; and page after page wails, in anger and in agony.

The poems and stories in Poisoned Bread are shattering- they explode into the minds of their readers, and they are all deeply felt by their writers. They are all experienced emotions of an imposed life. These are the writers

GRAPHIC BY TANEESHA IYANGAR

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who have come to the banks of literature and the simple art of writing in order to let out their pain and anguish, for there is no other way for them to do that.

And the index of Poisoned Bread is peppered with such greats of Marathi literature, though they were hardly considered to be so while they were writingand that’s probably because of what they wrote, and how they wrote what they wrote. There’s Namdeo Dhasal, whose verse has been, fortunately, known to the world outside Marathi or Marathi-Dalit writing for quite some time now; there’s Daya Pawar, who wrote one of the most unflinching, frank and brutally honest memoirs of our times; there’s the wounded yet scathing verse of Baburao Bagul, and the beautiful yet tortured words of Bhujang Meshram.

There are the stories by Waman Hoval and Anna Bhau Sathe, all marked by violence- a result of centuries of shame and silence. And then there are the memoir extracts from Pawar’s Baluta and Shantabai Kamble’s Majya Jalmachi Chittarkatha, texts which shook this reader to the bone and made him realize the chilling fact that his past is marked in blood, and that his ancestors are not without their fair share of blame for either being a part of the horror that was (and still is) casteism, or justifying it and ignoring it, if not playing a direct role.

In any case, even though the book was never meant to be, Poisoned Bread is an attack on all those who indulge in various- mild or serious- forms of casteism today, and all those who rally upon personal stories of how they couldn’t get a seat thanks to Reservationthere were days, the anthology makes them realize, when people couldn’t get a respectful life because they belonged to a particular strata of the society; there were days when their homes were burnt because they forgot or refused to bow down before the meaningless hierarchy forced upon them by a society they were never considered a part of. Reservation, the volume almost seems to be suggesting, is the least of anybody’s problems.

All this (and more, a lot more) makes Poisoned Bread a necessary reading. The volume is powerful as much as it is vital, but it is also a written testament of what Brahmanism did to the Indian society, and how it continues to influence the society today. And at a time when the subject of caste is rightfully in public discourse again, the anthology couldn’t have been more relevant than in the present literary and political atmosphere- and the fact that it remains a largely ignored and unexplored piece of literary writing from an equally ignored part of Indian Literature- the Dalit writing in translation- nudges us to pull the book out of academic research papers and present it before 25

the common readers, for it is a much-needed jolt to a society that seems to have forgotten the injustice and atrocities it once enforced and was, consequently, a silent witness to.

ATHARVA PANDIT is a TYBA student of Politics at Ruia College, Mumbai. He reserves a keen interest in the study of translated literature and political thought of various hues, as also in cricket and cinema.

Haruki MurakamiExplained

The Celebrated Japanese author of books like Pinball,wrote his first novel in English before switching to Japanese. Though he is a translator, he doesn’t translate his own books.

He was inspired to write a novel during a baseball game and he hated deadlines.

The existence of the idea of monopoly in india dates as early as 985 AD when Rajaraja Chola the then ruler of Tanjore and nearby areas wanted to establish total control over the trading routes. He built a strong navy and captured many ports. He captured the northern parts of Ceylon (Sri Lanka).

Albert Einstein, reportedly has a very well connected corpus callosum. Corpus callosum is a large bundle of fibers connecting the left and the right hemisphere to each other. The ideas which originate in the right needs to be expressed using language which originates in the left. The connection that exists in einstein’s brain is extraordinary.

This continued to exist throughout his life.

Between 1951-1953 British scientist Rosalind Franklin was very close to discovering the molecular structure of DNA as we know it today.

She was beaten to publication byu watson and crick who published it in Nature. Her x-ray photograph of the DNA being very accurate helped watson and crick come up with a solution. They published their double helix strcuture almost immediately. James watson, Francis crick and Maurice Wilkins(Rosalind’s lab partner) won the nobel prize for the same in 1962.

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HOMOECONOMICUS III

A

fter having a hugely successful stint with The Alchemist, The winner stands alone and a series of best sellers, Brazilian author Paulo Coelho’s 2014 novel ADULTERY was awaited with sky high expectations. The book originally in Portuguese was translated in English and maybe that took away some of the novel’s likeability. The story revolves around our female protagonist Linda who is a journalist in Geneva. She seems to lead an idealistic life with a husband who is so understanding, to the point of him not even having a voice of his own, children who adore her to bits, a job as a journalist (lackluster it may be but it practically landed in her lap). ”I arouse desire in men and envy in other women”, She claims smugly and that too all of this in idyllic Switzerland! Any innocent bystander would surely lament that she had no reason to be unhappy but yet we find our protagonist in a state of ennui and lassitude which seems inexplicable.

She soon meets her ex-lover, politician Jacob Konig during an interview and ends up having a romantic rendezvous with him, reliving days of their liaison and finds certain sparks ignited there which she thought were extinguished forever. She finds that feeling of dissatisfaction and apathy distraught within her mirrored in him and that somehow comforts her.

The only solace to her mundane life seems to be this liaison all at a risk of jeopardizing both of their marriages and careers. Soon she gets into a torrid affair with him which leaves her feeling used yet empowered .The narrative of adultery relies on this premise. How far will Linda go to satisfy her egoistic desires? Will sin and betrayal eventually beget crime and punishment?

The story takes a turn when she writes up a piece on psychologists and ends up meeting a Cuban shaman whom she finally poured her heart out to and he ends up showering some much needed advice especially when her life was starting to fall apart .

Just like everything else in life, her affair ends up being short-lived and she realizes that this wasn’t the answer to her melancholy. Living amidst times where egos have never soared higher and the divorce rates are rampant owing to infidelity ,one tends to question the husband who says he respects his wife`s decisions and accepts her with open arms deeming his love for her to be unconditional.

Even though the novel is far from perfect the core essence of the book is about ‘love’ and the book sings true to that. One is left to wonder if you need to sell your soul “to keep the love light burning” or “should one beg forgiveness for harboring an impossible love?” Coelho offers satirical jabs at the superfluous politeness of Swiss society, the shallowness of contemporary journalism with a dash of spiritual musings .He tries to persuade the reader to see the divine in nature, to lose oneself and realize you are part of something so magnanimous, that you should feel humbled.”And the eagle tells me ‘Come, You are heaven and earth, the wind and the clouds, the snow and the lake.’’ But sadly at odds with the previous insights and actions, the resolution seems glib verging on patronizing.

The concept of adultery and unrequited love are better highlighted in certain other classics like Anna Karenina and seem bleak here. The book seems a little rushed in general and lacks a certain clarity .We hope the next Coelho novel provides the insight we were looking for here in vain.

RITIKA RAGHUNATHAN I’m currently pursuing my MBBS from Pune. I’m a book enthusiast and I also enjoy writing and dancing.

26

THE IMITATION GAME An ‘enigma’ of sorts

Director: Morten Tyldum Written by: Graham Moore, Andrew Hodges (book)

(IN THE PIC: Benedict Cumberbatch as Alan Turing, Keira Knightley as Joan Clarke, Matthew Goode as Alexander Hugh, Allen Leech as John Cairncross, Matthew Beard as Peter Hilton)

“Sometimes it is the people no one imagines anything of who do the things that no one can imagine.” This line aptly describes the motivation of the characters in the movie. Based on Andrew Hodges’ book “Alan Turing: The enigma of intelligence”, the movie embarks upon the war of the countries as well as the war of the intellects during the World War II era. In 1939, the British military and MI6 intelligence bureau hires Cambridge mathematics professor, Alan Turing to decrypt encoded messages by Enigma, an advanced Nazi machine. Going against the methods of his teammates, Alan decides to design a computing machine which could interpret Enigma code. As the war proceeds, it becomes a race against the time. It was because of the Turing machine that the war ended two years early. Despite such a valuable contribution to the victory of England, he was apprehended for homosexuality and was castrated chemically in 1951 which is believed to be the reason for his suicide in 1954. Benedict Cumberbatch’s anti-social and narcissistic Alan Turing is a man of logic not only in his work ethics, but also up to the extent of socially approaching and conversing with people. His weak sense of humor and tendency to take everything literally adds to the hilarity. Sometimes, we see some shades of “Sherlock” but overall his acting tact shows his dedication level as a method actor. There is a scene in which after he tells detective Nock about his life in wartime, he asks, “Now you decide: Am I a machine?

Am I a human? Am I a war hero? Or am I a criminal?”

To which detective Nock replies, “I can’t judge you.”

This scene highlights that the complexities of a human mind and machines are unmatchable no matter how they advanced they become. His achievements

SMITH PATEL: Stays nearby the banks of the river of Art and is blessed by its benevolence on human minds.

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shouldn’t be shadowed because of his homosexuality (Homosexual relationships were illegal in those days).

Keira Knightley as Joan Clarke is satiating to look at and her chemistry with Benedict is ideal couple goals.

Matthew Goode (Alexander Hugh) plays his part with a boyish charm and is never boring. His character is in contrast to Ben’s. Mark Strong as the head of MI6, Stewart Menzies, is made for such kind of roles. His prowess is remarkable as he elegantly played similar roles in Kingsman and Tinker Tailor Soldier Spy. Human nature is an enigma in itself.We want harmony, peace and compassion to be prevailed among us but on the other hand, we are vicious beasts who can tear apart each other to gain power by imposing our strength and brutality. Alan says, “You know why people like violence? It’s because it feels good.

Humans find violence deeply satisfying. But remove the satisfaction and the act becomes hollow.” A scene follows, after the above line has been spoken, showing the bombing on Britain by Nazi planes in the dark of the night and debris caused by it in the morning, justifying the line poetically. Within the above line lies the very essence of a war. War is like rage because until it subsides, a lot of damage has been done and in the end it leaves us with nothing but remorse and emptiness. It makes us question our morality.

Director Morten Tyldum presents us a signature vista of the World War II with set pieces and CGI on point.The film is paced well and is a balanced mixture of a biopic and an espionage thriller.The screenwriter Graham Moore has immaculately turned the novel into a film script. The movie is historically inaccurate to a moderate level as the screenwriter had taken liberties to increase its cinematic appeal. The background score is yet another iconic feature, elegantly symphonized by Alexandre Desplat. It’s the third best soundtrack in my favourites list after The Theory of Everything and Birdman.

The film garnered 7 Oscar nominations and an academy award for best writing, Adapted screenplay.

It was widely lauded by the critics for its subject matter. It is at 238th position on the IMDB top 250 movie list. It’s not just a one-time-watch. The Imitation Game is definitely a movie to be kept in your movie archives. It’s an ode to the unsung war heroes; a tribute to Alan Turing.

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HOMOECONOMICUS III

THE CONSTANT GARDENER

“Disposable drugs for disposable patients”, as quoted by one of the characters, is what this film tries to tell the viewers. Based on the novel of the same name by John le Carré, the film’s plot is derived from a real life case in Nigeria back in 1996, where its population was used as a testing sample for a drug, leaving 200 children disabled and 11 dead.

Just a few minutes into the film, Justin Quayle (Ralph Fiennes), a reserved British diplomat posted in Kenya, is informed that his wife Tessa (Rachael Weisz) has been killed while on a trip with their friend Arnold. The non-linear storytelling takes us back to the day when he met Tessa, passionate and aggressive, a complete opposite of Justin.

It was during their difficult posting in Kenya when Tessa is killed with Justin, determined to find out the truth behind her death. This hunt as it turns out,becomes an ugly conspiracy involving a huge pharmaceutical brand and the British High Commission itself! Further, the investigation results in Justin discovering and understanding a lot more about Tessa. He begins to respect and love her more than

ever and decides to finish, what she started.

The director of the film, Fernando Meirelles, presents the film in a complex manner using non-linear storytelling with the love story of the main characters in the background. It can also be said that Justin’s growing love for Tessa even after her death is what motivated him to investigate further.

Portraying the role of horticulture hobbyist, Justin is easily one of Fiennes’s finest performances, on par with his role of Amon in Schindler’s List. Also, performances of Weisz, Danny Houston, Bill Nighy, and Pete Postlethwaith as Tessa, Sandy, Pellegrin, and Dr.Lorbeer respectively are commendable. In fact, the performance of the actors is one of the biggest positives of this film. Director Meirelles, collaborating with cinematographer César Charlone (both worked together in the critically acclaimed City of God) use similar visual style of close ups, hand held cameras as used in City of God. They also create impressive shots of the slums and savannah in Africa while changing to darker tones for the scenes shot in England (too 28

many close up shots though). The story keeps moving at an impressive pace though slows down at some intervals, for example, Justin watching the old videos they had recorded together on webcam.

Unfortunately, after all the hard work Justin does in collecting evidence against the pharmaceutical company KDH, the film wraps up with a note that would ring as disappointment for most viewers , in my opinion.

In conclusion, The Constant Gardener is a very well made film with a strong storyline, wonderful dialogues and brilliant performances by the actors. The movie gives out a strong message of how the lives of the ones living in impoverished countries in Africa are considered as inferior to others and the work done by various agencies isn’t enough to bring about a significant change there.

ADITYA SHARMA is an Economics Undergraduate, an avid follower of movies, books and sports, a cynic, an introvert.

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PHOTOGRAPHED BY JANKO FERLIC

KINDLE (?) ME NOT

HOMOECONOMICUS III

“W

e are the only species in the world with a developed and reflective intelligence.

One of the greatest rewards of this intelligence and one of the greatest gifts from our ancestors is the discovery of writing. To be human is to read.” As Gurcharan Das rightly puts it in his book titled ‘the Elephant Paradigm’, the power of the written word has only grown in importance from its inception.

In a country like India which enjoys a vast diversity in demography and thus lifestyle, the pivotal role that reading takes in the form of literacy, concerning education of all kinds and in all fields, has been given further reach by means of technology. It is thus important to study the significance of technology in the reading habits of a fast growing and fast changing, India.

If there is any constant, it is change. Change affects the set of choices that people face. Over the last few years, the digital revolution has carried the book from the physical space to the virtual space. People can now choose between spending an afternoon 30

AA

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GRAPHICS BY TANEESHA IYANGAR

visiting the bookshop and downloading a whole series on the Kindle, at the drop of a hat. People can stock up tedious volumes on the shelf, or carry their entire collection around the world in no more than a few hundred grams. One barely requires to describe the wonders of technology.

With digitization, people can have more of both: books as well as time to read them. The time they would have otherwise invested in traveling to and from the bookstore, or cleaning the bookshelf once a month can be used to read an extra novel on the screen. However, people often make choices that do not fit the bounds of what the economists would describe as ‘rationality’. The behavior of people is motivated by a range of factors, of which the calculations of efficiency are only part.

People make irrational choices. That’s what makes studying these choices so exciting. For instance, a person’s reading habits have as much to do with the

HOMOECONOMICUS III

process of reading as they have to do with the content of reading. Some booklovers enjoy the feel of paper.Yet others love the rustic odour of ancient books stacked in the library. While few boast of their fancy bookmarks as much as they boast of their books, others love to ‘see’ their knowledge sitting in their cupboard. Those of the more academic kind, love to claim their newest book with a graceful ink pen signature on the first page. There is elegance in such irrationality, an elegance that rationality cannot replicate.

We tried to see whether the ‘rational’ readers dominate the ‘irrational’ readers among the book-lovers of young Mumbai.

Taking a look at the gradual decline in the consumption of physical books over the years (Nielsen and API, 2015), it may be the notion of many that reading habits are changing with time; however, upon surveying a sample of 200 young, self-identifying bibliophiles, we found that over 75% of them still belonged to the community of purist readers. These are readers that adhere strictly to their old-school norms, those that enjoy taking a whiff of newly purchased, leather-bound books, those that savour the way an aged, yellowing page feels under their fingertips, and those that bask in the joy of making murals out of bookshelves.

The price of paperbacks hardly factors into this preference, as 70% of the readers we surveyed were associated with neither a library nor a reading group, and were as disposed to buying books as they were to borrowing. A majority willing to PREFERENCE OF PAPERS BACKS OVER E-BOOKS spend Rs. 200 or higher — some even more than Rs. 400 — for a single book, further proved that when faced with a tradeoff between opting for a less expensive and more convenient alternative, and sticking to their old-school values, they tended SEGMENTATION AMONGST PAPERBACK READERS to choose the latter. However it is worth noting that as many as 84% were still open to switching to e-Books or PDFs in the future.

Alternatively, the people who preferred e-Books, the minority, voiced that their shift from paper to screen was caused by a multitude of factors — the most dominant ones being higher portability of the gadgets, easy accessibility, 32

REASON FOR PREFERENCE OF PAPERBACKS

REASON FOR PREFERENCE OF E-BOOKS

diminution of storage hassles, and friendliness to na- MONEY SPENT ON > Rs.400 23.2% ture as well as one’s pocket. They opined that this < Rs.200 21.9% shift is more rational, practical, and keeps pace witRs.200 to 400 55% From the above analysis it is important to note that the shift in reading habits amongst the majority of MAYBE 2% the working population in India is of consequential 8.2% NO relevance. If the shift continues, even in its slow pace, YES 89.8% it would mean a tech-driven society that would ulE CONVENIENCE timately result in what is known is the “AI (artificial intelligence) takeover”. This takeover may also subsequently signify the end of the reading age. On the other hand, if the shift takes a downward turn, it would put forth that the populous is not participating in or keeping up with the pace of progress led by technology, in society.

The inference would thus be to sustain a routine that reflects moderation. If change were to take place whilst still maintaining the vital role that conventional literature and thus reading plays in the process of learning, then ‘utility’ will overshadow ‘use’. This moderation will further provide a place for readers of all backgrounds, thus bringing unity even amongst the divided.

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HOMOECONOMICUS III

PHOTOGRAPHED BY AARON BURDEN

PAPER MACHE

Get your taza reasearch finding served hot from the feild (data)

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W

ith each passing day India edges closer to crossing the cusp between a developing and a developed nation. At this critical stage of transition, both demographic and economic, our patterns in mortality burden are noticing a change: a growing inclination towards the patterns of advanced countries. Incidences of deaths due to cardiovascular, respiratory causes, unintentional injuries and the generic category of non communicable diseases are registering a steady increase (an 11% increase in deaths due to non communicable diseases from 2000 to 2012), indicating India is on a trajectory similar to that of more developed nations.

This apart, there are 85000 deaths a year from road crashes which has lead to WHO predicting that road accidents will almost lead to 546000 deaths a year by 2020.This discernable change in pattern necessitates a need for Emergency Medical Services since the lacuna for the same in the Indian healthcare system will only serve to worsen the scenario. Emergency Medical Services (EMS) and their dissemination, is possibly one of the major areas where the current healthcare infrastructure is lacking. Emergency Medical Services are defined as “services that address situations that result in sudden bodily harm due to injury and other urgent medical conditions. The emergency medical services include the evaluation of the person in the distressed condition, the provision of appropriate pre-hospital care and transportation to an appropriate hospital for the provision of definitive care.” The current EMS infrastructure in India is plagued with the following problems:

services and disregarding its right to health implications. Despite a unified emergency number in the pipeline, the glaring detail about our nation’s EMS is the lack of a “central government agency to integrate policy-making, planning, financing, drafting legislation or establishment of minimum standards for the performance of a trauma-care system.” There exists no legislative arrangement, which could possibly lead to the creation of a system that has checks for ensuring quality control.

2.Absence of a single system, which manages the

emergency medical services in India:

The current system is highly fragmented, with different emergency numbers in different parts of the country and every private hospital with its own number and protocol. Apart from the absence of a unified system there is a huge disparity in terms of access and quality, which renders the system highly iniquitous.

3.Specialisation: In the present Indian scenario, a patient is taken to the nearest hospital, irrespective of its diagnostic and treatment capabilities. Multiple referrals result if the hospital does not have the resources to treat certain acute conditions, wasting valuable time in trying to move the patient from one facility to another. It is imperative that the government identifies specific facilities for the care of patients so that a patient is taken

GRAPHIC BY TANEESHA IYANGAR

1.There is no specific mention of “paramedics”, and pre-hospital care in the three-tiered structure of Indian Health care.

Without detailing such a role, and awarding importance to this cadre in the health care policy of the country, it is impossible to develop this sector. A major criticism of the National Health Policy report is that it fails to accord any importance to emergency services, and the paramedic cadre in the overall health sector. The lack of development of this integral part can hence be sourced to the policy makers not acknowledging the need of emergency medical 35

HOMOECONOMICUS III directly to the most appropriate facility at the time of needs of the country. In the three tiered health care emergency (Sharma & Brandler, 2014). system entrenched in India, emergency medical care and pre-hospital care seems to have no footing at all.

This is significant because a lack of access to these 4.Quantity and Quality: Although there is no data recording the number of services violates every individual’s right to health paramedics in India or the number of ambulances it is care, and right to life because by definition emergenclear that the paramedic cadre is grossly inadequate cy care is a matter of life and death (Kobusingye, O). for the Indian population. It is clear that India not The government needs to evaluate its health policy only faces a quantity deficit but also a quality deficit, focus in the context of the current morbidity trends, the lack of trained pre-hospital providers, modern and recognize the deficit in health care professionals equipment and ambulance vehicles for example, also in the paramedic cadre. It also needs to acknowledge account for the challenges and short comings to pro- the right to health implications of pre-hospital or emergency care services by defining these services vide quality emergency medical services. and outlaying their role in the health care infrastructure. If it does so interventions relating to this tier 5. Legislation for emergency services The lack of legislation for EMS is a major problem of healthcare services can be made more specific. By in India. If the government sets up a centralized reg- setting up a policy brief, and first identifying the need ulatory authority it would be able to specify the re- for EMS, it can ensure interest for the issue. quirements for trained paramedics, gradation of skill levels for paramedics, uniquely identifying hospitals A developing nation, India, continually finds itself at and health care centers to establish a network of the brink of economic development and yet several healthcare professionals and facilities. In the absence miles from a quality level of human development, priof Centralized Regulatory guidelines and quality stan- marily due to the lack of healthcare, education and dards there is no monitoring of Protocol, and checks infrastructure. The inadequacies in the provision of on efficient practices. Given the nature of health care these welfare goods often mandates the question services, not having set a framework for proper func- whether they should continue to be treated as merit tioning puts lives at risk. Hence given that the Emer- goods or should their delivery system evolve into a gency Medical Services (EMS) are established for the public private partnership model. treatment of emergency conditions it is critical that an effective EMS, is accessible, prompt and is governed This piece is an excerpt from a research paby rapid assessment and timely treatment, which can per the authors have worked on. Please write only be ensured in the presence of strict monitoring. to them to access the complete paper.

6. Financing Emergency Medical Care: Given the Right to Health implications of emergency care, it essentially should be a free public good. However given the financial constraints the government faces this will be difficult to ensure. The total expenditure on health in India as a percentage of GDP hovers around four percent, which is dismally low when compared to other countries. The government needs to attract private investment to increase the budget, and set up regular audits to curb resource waste.

Conclusion: India has focused it’s health policy in the past few years in limiting and controlling communicable diseases, ensuring vaccinations and providing quality health care facilities to the more vulnerable sections of the country. However like many low-income countries, it has neglected or given very low priority to emergency care. Health care policy has to constantly evolve so as to cater to the changing health care

References: 1.India’s single emergency number ‘112’ to be active from January 1. (2016). The Indian Express.

2. Sharma, M. & Brandler, E. (2014). Emergency Medical Services in India: The Present and Future.

3. Dr. A Venkat Raman and Prof. James Warner Björkman. Public/Private Partnership in Health Care Services in India.

4. Changing Levels and Trends in Mortality: the role of patterns of death by cause. (2016)

VASUDHA RAMAKRISHNA and MOKSHDA KAUL are both pursuing their first year of Masters in Economics. They are both passionate about understanding the nuances of policy design, and hope to undertake research in this field in the future.

36

B

O

E

I

N

G

A flight from war times to the present.

A century long peregrination.

Abstract One of the perennial inference of today, is that war and its military disburse has enkindled positive economic pinnacle for parts of the global economy. A similar story runs along with the famous aircraft manufacturer, Boeing. It began in 1916, now the world’s largest aerospace company and manufacturer of commercial and military aircraft. Boeing serves over 90 countries.The company also manufactures helicopters, missiles, satellites and a wide range of products used in defence and security. The cost of importing airplanes during the World War I era was expensive. The US government benefitted since Boeing manufactured planes on their soil. During World War II, to prevent air attacks, Boeing covered the production plants covered with farmland items. The main motive was “we are all in it together”. Boeing lead in cooperating with other airlines which helped the US defence forces. During this period, it manufactured airplanes with the aim of helping the nation. The production of other airplanes was reduced during this period. By the end of World War II, all the wartime airline partners of USA consolidated under Boeing. This helped them expand their company and brand. Boeing’s products allowed America to best their Axis foes in battle. Air superiority ensured the ability to cross the Pacific islands — bringing war to the Japanese homeland. Boeing employed several women workers whose husbands were at war at their manufacturing units, which enabled the women get a stable monetary status. Boeing believed in the policy of co-operation, not competition. This enabled the organization to have a trump card against all its adversaries in the market. By 1944, the company established itself as the leader in the airplane manufacturing industry.

Boeing passenger and military aircrafts were used by several governments to evacuate people who were caught up in war zones. The Indian government used dreamliners to rescue hostages from Yemen, Syria, Turkey, and Kuwait. Boeings were used to transport 14,325 Ethiopian Jews to Israel in 36 hours.

37

In 2015, Boeing converged with China’s National Development Reform Commission. It spends 3% of sales on research and development.Another unique quality of the company is the fact that it ensures diversity while employing people. In the beginning of March 1944, production had been elevated in such a manner that over 350 planes were built monthly. The air transport industry generates 32 million jobs globally.

Boeing created 2000 jobs in the U.K. Post-Brexit Hypothesis.

The objective of this paper is to ascertain the way Boeings’ motives and fundamentals have changed from war times to contemporary times. We believe that its directives have transformed from areas of defence and security for nations to manufacturing passenger utility aircrafts with a view of profit earnings and a better global output.

Methodology.

The data gathered in this document comprises of information from annual reports of Boeing, museum websites for world wars, Boeing’s official website, aeronautic journals, Reuters, market websites, and other authentic sources. No information is collected by a primary source. The case study follows a logical flow.

How it all began.

The last century has seen man walk on earth to walk on the moon. Decade after decade, technology moved leaps and bounds. William Boeing, a lumber company executive from Michigan, took a ride of a Curtiss seaplane with naval commander, Conrad Westervelt in 1915. Having no knowledge of concept did not stop them from exploring aeronautics. A year later, they successfully assembled the Boeing & Westervelt (B&W) Model 1 seaplane in Boeing’s boathouse. It took its maiden flight on June 15, 1916. William Boeing established Pacific Aero Products Co. on July 15, 1916. When one year later Westervelt was recalled to active service in World War I, the company was

HOMOECONOMICUS III renamed to the Boeing Airplane Company.

World War I. The American Defence forces rejected B&W model 1 and beseeched William Boeing to design airplanes for them according to their parameters. Accordingly, Curtiss HS-2L was assembled. They were used to guard the American coasts during this time barricade as well as to upskill the pilots. A social impact of this was that the defence forces employed several trainers and pilots for the airplanes. This not only helped America guard their territory and become a global superpower post the war, but generated employment in the form of airplane manufacturers, pilots, trainers, servicemen etc. Since these airplanes were manufactured on American soil, the overall expenditure of war alleviated since they were not imported. It can be observed that the primary motive of the company was to aid the US defence forces during these years.

Post World War I. There was a curtailment of airplane manufacturing in 1920. The US defence forces cut down Boeing’s contract to manufacture Curtiss HL- 2S into half. In order to help the company survive, Boeing returned to manufacturing furniture for a short span of time.

In 1919, Boeing C-700 carried 60 letters from Vancouver to Seattle thereby becoming the 1st carrier of airmail service. Later, model 40 was created specifically for air mail services. Model 40 could carry 1000 mails along with 4 passengers. However, the company did not completely stop manufacturing aircrafts for defence purposes. But that was not the primary motive anymore. By 1922, Boeing negotiated a number of contracts with the US military regarding aircraft manufacturing.

World War II. The agenda and operations of the company shifted from passenger utility and commercial aircraft manufacturing to manufacturing of planes for defence purposes. Boeing and its partners made 98965 airplanes for the American defence purposes during World War II. Boeing solely represented 28% of the total aircraft production of USA, thus pioneering industrial growth during this period. Even during the war period, Boeing stood out as the leader of innovation in its field. It is a company that is always known to have never compromised on its quality. Also, Boeing encouraged employment of women during World War II, especially of those whose partners were on the battlefield.

38

DID YOU KNOW: Boeing Japanese factories along the of west coast were camouflaged into fake houses and forests so that the Japanese were unaware of their functioning. A picture perfect fake neighborhood was made at 40ft (from ground level) to cover the Boeing factory of Seattle.

Post World War II. After the termination of the World War II in 1945, Boeing resumed to building more passenger and commercial aircrafts than those required for military purposes. Due to a pivotal role played by the company during World War II, it helped the company expand and grow many folds than its competitors.

Mergers and Clients.

• Boeing and Japan: For more than 50 years, Boeing has been the top provider of commercial jetliners to Japanese airlines and a major supplier of military equipment and aircraft to the Japanese Ministry of Defence (JMoD). Japanese carriers have ordered more than 970 Boeing jetliners. In the past decade, almost 80% of commercial jet airplanes ordered by the Japanese have been Boeing products. More than 65 Japanese companies are suppliers to Boeing across its commercial and defence product lines, procuring than $5 billion worth of goods and services from Japan every year.

• Boeing and Australia: Boeing Research & Technology-Australia was established to support the future growth and profitability of Boeing Australia subsidiaries. Customer support activities are coordinated and supported by Boeing’s two main business units: Boeing Commercial Airplanes and Boeing Defence, Space & Security. It has more than 3,000 employees at 27 sites and for 90 years.

• Boeing and the UK:The Boeing relationship with the United Kingdom dates back to more than 75 years.

The relationship has grown to involve more than 250 U.K. companies as partners. Boeing Defence UK Ltd was established in 2008. Boeing has enduring partnerships with U.K. companies such as Rolls Royce. It is investing in U.K. technology and expertise through research and development programs with universities such as Cambridge. Boeing has delivered approximately 600 airplanes over the past 40 years. British Airways has around 175 Boeing airplanes in its fleet.

The United. Kingdom is a strategic market for Boeing Defence, Space. Today, Boeing has approximately 1,700 employees at sites across the United Kingdom.

• Boeing in India More than 75 years ago, Tata Airlines operated a DC-3 aircraft in India, Boeing has been the mainstay

of India’s commercial aviation sector with airlines such as Air India, Jet Airways and SpiceJet. Boeing’s relationship with India on the defense front goes back to the 1940s, when the Indian Air Force enlisted two Boeing aircraft made by McDonnell Douglas. Presently, with 10 C-17 Globemaster strategic airlifters and eight P-8I maritime surveillance and anti-submarine aircraft delivered, Boeing is playing an important role in the mission-readiness and modernization of India’s defense forces. Boeing subsidiary, Jeppesen—a provider of flight navigation solutions—is well established in Hyderabad. Boeing in India has around 500 employees and more than 3,500 people work on dedicated Boeing supply–chain jobs. The company continues to increase its footprint.

• Merger with Douglas: On December 15, 1996 the CEOs of Boeing and Michael Douglas announced that the two companies would merge in a $13.3 billion stock -for-stock transaction.The EC is concerned the exclusive deals threaten the business of AIRBUS INDUSTRIES, a consortium of four European firms.

• Boeing and Brexit: Boeing said its new European hub would remain regardless of how the public vote in June. Boeing employs 2,000 staff in the UK. It has also invested £1.8billion in the country.

innovative products and services to help them run their business more effectively.

Boeing Market Share.

Boeing ended 2015 on a down note and did not do much better in the first quarter of 2016. Boeings chief executive Dennis Muilenburg said that Boeing will manufacture 20 less aircrafts this year than 2015. For the first quarter of the year, Boeing (BA) delivered 176 aircrafts, which is 4% less than the 184 aircrafts it delivered in 1Q15. This resulted in a 6% YoY (yearover-year) decline in Boeing’s Commercial Airplanes segment revenue to $14.3 billion for 1Q16. Despite the slowdown, Boeing’s deliveries are still higher than rival Airbus, who delivered only 125 aircraft in 1Q16, in the same period. Boeing has a commercial airplane backlog of 5,700 aircraft valued at $424 billion USD , this has made a number of analyst optimistic about the future of Boeing. For 2016, BA maintained its delivery guidance of 740-745 jets. Revenues for BA’s Commercial Airplane segment are expected to be in the range of $64 billion–65 billion, similar to revenues in 2015. This means that revenue per aircraft is expected to improve due to the transition to MAX and higher Dreamliner sales.

Social Impacts.

A Boeing sponsored project known as “Seed Saving and Sustainable Energy Partnership in East Bali” has been increasing the capacity of farmers in Bali. The farmers were tutored in packaging, marketing and selling these seeds, enhancing their local economy. In Germany, Boeing and the Berlin Community Foundation (Bürgerstiftung Berlin) aimed to spark and nurture childhood curiosity about nature with the Environmental Detectives project, which allows children to learn about environmental protection. Boeing and the non-profit Engineers without Borders-USA, have worked together since 2008 to solve critical community problems, through low-cost, small-scale engineering projects that improve basic quality of life. In 2014 Boeing supported 55 projects in 24 countries, positively affecting the lives of 322,500 people. In the aftermath of 2011 Tsunami in Japan, Boeing employees across the world, donated $1.3 billion from their own pockets. The Boeing charitable trust pledged $1million to support disabled persons in Tohoku.

Boeing Japan employees also volunteered in the area since the disaster struck. Boeing passenger and military aircrafts were used by several governments to evacuate people who were caught up in war zones.

• The Indian government used dreamliners made by Boeing to rescue hostages from Yemen(Operation Rahat, 2015), Syria (2014), Turkey (2016), Kuwait

Acquisitions of Boeing 1. On 27th July, 2014 Boeing acquired Ventura Solutions Inc. a hardware and software engineering company that provides custom solutions for government customers.

2. On 27th may, 2014 announced the acquisition of AerData B.V which provides integrated software solutions for lease management, engine fleet planning and records management.

3. On 25th October, 2012 Boeing acquired Miro technologies, a software company specializing in enterprise asset and supply chain, management, repair and overhaul service (MRO) and performance based logistics (PBL).

4. On 9th may, 2012 Boeing completed the acquisition of Inmedius, a provider for software applications and services for managing and sharing information and learning content.

5. On 29th July, announced it has completed its acquisition of Narus, a leading provider of real-time network traffic and analytics software used to protect against cyber- attacks and persistent threats aimed at large Internet Protocol networks.

5. On 14th June, 2006 Boeing announced the purchase of Carmen systems. This acquisition supports Boeing’s strategy of providing its customers with 39

HOMOECONOMICUS III (1990) • Operation Solomon 1991. Boeing 747s were used to transport 14325 Ethiopian Jews to Israel in 36 hours. This operation was carried out by the Israel’s government • Operation Magic Fire. A Boeing 737 was hijacked by a Palestinian terrorist organisation in 1977. The GSG commandos killed the hijackers and rescued the civilians, in less than 7 minutes.

Environmental Impact.

As of 2016, 100% of the electricity at Washington 737 and South Carolina 787 factories comes from renewable sources from a combination of hydroelectricity and renewable energy credits from wind energy.

Boeing provides funding to bring people from different communities together to help advance environmentally progressive storm water technology, infrastructure, and policy. Boeing made its mark when KLM flew the world’s first commercial biofuel flight, which was a Boeing 787-800 running on cooking oil, in 2011.

Later that year, Continental Airlines flew Boeing 737800, a biofuel flight, on Algae. Boeing South Carolina was awarded 2016 Rain Catcher Award for excellence in the implementation of storm water green infrastructure practices. BSC reuses storm water from site retention ponds to irrigate site landscaping.

Boeing also got awarded 2015 Best Workplaces for Waste Prevention and Recycling for showing action that helps reduce the effects of climate change and feeding recycled materials back into the economy.

To meet the commitment of zero revenue-adjusted growth by the end of 2017, Boeing is implementing many projects throughout the company to reduce the amount of hazardous waste that they generate.

Boeing’s hazardous gas output reduced from 1.93 million pounds to 1.87 million pounds, resulting in 10% decrease. Even greenhouse gas emissions were decreased by 7.8%. Also, the 787 Dreamliner family improves fuel efficiency and reduces carbon dioxide emissions by 20- 25% compared to airplanes it replaces. Economic Perspective Boeing’s paradigm shift from war time employment of labourers and workers to present-day hiring of innovative mindsets and persistent hard workers, is a big step in the employment throughout the aviation Industry. At the end of World War II, total employees were more than 45000, who were hired with a motive of nationality to produce for the Allies power.As of 2016, Boeing has more than 150000 employees in more than 66 countries, whose spirit is to determine harmony. During the time of war, Boeing’s motive of Cooperation not competition was a wise decision to keep the aviation industry 40

stable. After the war, these companies which helped Boeing manufacture aircrafts became its subsidiaries, expanding its reach. Revenue $ 81.70 billion Operating income $ 6.31 billion Profit $ 3.9 billion Total assets $ 88.90 billion Total equity $ 5.96 billion Spread across more than 150 countries, its reach has linked to ample number of customers, throughout the years. As its assembly units are getting parts and other tools by importing from other countries, more than 21,000 suppliers and partners around the world are indirectly a part of Boeing’s manufacturing team.

Cash Flows: Boeing had claimed its position as the world’s largest plane maker for the third consecutive year in 2014.

The company’s strong financial position is a significant factor in its top industry ranking. Boeing generated $11 million cash at the end of 2014, providing the company with liquidity and the opportunity to invest in growth areas of the business.This cash cushion also allows the company to return more cash to its investors. Boeing repurchased 46.6 million shares in 2014.

Industry Comparison of Financial Statements: Boeing has a sales yield of 85%, which is well above the aerospace industry average of 58% and the industrials sector average of 56%. This indicates that the company is growing its sales as well as its earnings per share (or EPS). Boeing has consistently beaten consensus estimates of its EPS in the past 12 quarters, as well as revenue estimates in eight of the last ten quarters.

The company has been successful in reducing its debt levels in the recent past, reflected in its low current ratio of 1.20 and its quick ratio of 0.37. The company has maintained its operating margins at 8% for the last three years, compared to Airbus’s 5%.

Stock Performance: In 2014, Boeing’s (BA) stock returned -5.04% for the last year compared to the index’s (SPY) 11.8%, General Dynamics’s (GD) 17.35%, Northrop Grumman’s (NOC) 28.5%, and Lockheed Martin’s (LMT) 30% returns. This was mostly due to the lack of investor confidence amid various technical problems reported for the 787 Dreamliner. However, the company has generated about 150% returns in the past decade, easily beating the index’s 70% return. Boeing’s stock valuation shows that the company has outperformed the industry and the sector comfortably, as its earnings per share (or EPS) growth percentage stands at 23%. The company also has an impressive return on equity of about 42%, compared with the group average of 18.5% and the sector average of about 14%. It also has a commendable return on assets.

Robust dividend payments:

Boeing has consistently paid dividends to its investors for more than 77 years.The company’s dividends have shown very strong growth, by over 88% for the past two years and by 192% for the decade.The company’s dividend yield is an attractive 2.8%, as compared with its competitor, Airbus’s 1.9%.

Cash returns: The company conducted repurchases of nearly $6 billion during 2014, and it announced a new $12 billion share repurchase program to replace its older one.This new repurchase program is expected to result in higher EPS valuation for investors as the buyback progresses over the next two to three years.

This indicates that the company is confident about its growth and is committed to growing its shareholder value.

Conclusion: Along these lines, we have come to desistance that Boeing as a company has grown economically, socially and environmentally. It has changed its purpose from security of nations, to profit making with a global outlook and sustainable development over the years. It has enlarged its footprints to all continents and now employees hundreds of thousands skilled personnels. Boeing does not deter on quality standards and only promises the best. After 100 years, it has still managed to retain its position in the eyes of the aeronautic industry. The company has faced downfalls but has stood tall and emerged as more prominent. It has been efficacious in paying back its debts and the people who are a part of the company have an optimistic standpoint for the future of the company.

SOURCES 1. www.boeing.com/resources/boeingdotcom/principles/environment/pdf/2016_enviro nment_report.pdf 2. www.boeing.com/resources/boeingdotcom/principles/environment/pdf/2015_enviro nment_report.pdf 3. www.postandcourier.com 4. http://www.nationalww2museum.org 5. http://www.bloomberg.com/quote/BA:US 6. http://www.boeing.com/commercial/market/long-term-market/world-regions/#/asia 7. http://mobile.reuters.com/article/idUSKCN0YD0TK 8. www.boeing.com/timeline 9. www.encyclopedia.com 10. www.archives.gov 11. www.u-s-history.com 12. www.nationalww2museum.com 13. www.dornob.com 14. www.assemblymag.com 15. www.crunchbase.com 16. www.marketrealist.com 17. www.marketwatch.com 18. www.marketshare.com 19. www.boeing.mediaroom.com 20. www.boeing.com

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PRITIKA HIREBET: A person always on the move to exploring new opportunities. I like to do research on various aspects of economy.

Singing ; reading; teaching; analysis of financial markets are some of the areas of my interest.

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41

HOMOECONOMICUS III

MAJOR CHALLENGES Agricultural development in the country can be broadly divided into three major phases namely, the period prior to the green revolution till the mid1960s, the green revolution period which saw the expansion of irrigation facilities, use of high yielding varieties of seeds, a huge increase in inputs which resulted in increased yields per hectare as also an increase in productivity. The period also witnessed the implementation of land reforms and a deepening of the rural credit institutions. The spatial spread of the green revolution widened in the 1980s alongside a diversification of agriculture to non-food grain crops.

A criticism of the green revolution strategies, however, was that it benefitted only farmers of certain crops and had a limited spread.The period after 1991 constitutes the third phase. The macroeconomic reforms of the early 1990s led to the improvement in the terms of trade for agriculture which in turn incentivized private investment in the sector. The fiscal situation of the 1990s resulted in a decline in public investment which had an adverse impact on the development of rural infrastructure and extension services along with a decline in institutional credit.

Further, the post reform period of the 1990s also witnessed a green revolution fatigue which was marked by a decline in agricultural growth as a consequence of declining input use, factor productivity and profitability. It is essential that improvements in agricultural development extend to rain fed areas so as to protect farmers from the impact of adverse climatic changes such as floods and droughts(Rao, 2004).

The sectoral share of agriculture and allied activities has shown a steady decline from 35.27 percent during the 1970s to 16.11 percent during the period 2001-14. Despite its declining share in the countryâ&#x20AC;&#x2122;s GDP and falling growth rate, the agriculture and allied activities sector continues to be the mainstay of the Indian economy and supports the livelihood for 83.3 The average decadal growth of agriculture GDP witcrore or 68.8 percent of the rural population of the nessed a phenomenal increase in the 1980s when it country as per Census 2011 42

increased from 1.41 percent in the 1970s to 4.67 in ha in 1970-71 to 1.55 ha in 1990-91 which further the 1980s. Agriculture growth declined to 3.28 per- reduced to 1.23 ha in 2005-06 and was 1.15 ha in cent in the 1990s and further to 3.12 percent since 2010-11.

2000-01. An analysis of growth in agriculture since 2001 reveals that there has been some revival in growth. Agriculture GDP grew at 1.72 percent during 2001-05 and almost doubled to 3.2 percent during 2006-10 and further increased by 1.6 times to 5.2 percent during 2011-14.

Wide Variations in Growth across States: During the period 2005-06 to 2013-14, the all- India growth rate of the agriculture sector was 4.10 percent at 2004-05 prices, a wide disparity in the growth rates was observed across States.

Among the major States, Madhya Pradesh (10.3 percent), Jharkhand (9.74 percent), Chhattisgarh (8.03 percent), Gujarat (6.2 percent), Rajasthan (5.91 percent), Maharashtra (5.90 percent) and Bihar (5.11 percent) witnessed a growth higher than the national average whereas Andhra Pradesh (4.48) Himachal Pradesh (4.60) and Tamil Nadu (4.45 percent) have had a growth rate which was around the national average. States such as Haryana (3.6 percent), Punjab (1.4 percent),West Bengal (2.4 percent) and Karnataka (3.6 percent) have observed a growth rate which has been below the national average during this period. Agriculture growth among the North East States has been a combination of high growth States such as Arunachal Pradesh (6.8 percent), Mizoram (9.7 percent), Tripura (6. 2 percent) and Sikkim (8.1 percent) whereas Assam, Manipur, Meghalaya and Nagaland had an agricultural growth between 3 and 4 percent during the same period (Government of India, 2014) Nature and Size of Holdings: Another concern has been the steady decline in the average size of holdings and a greater marginalization of operational holdings which can have a far reaching impact on income, use of technology and sustainability of modern agricultural practices. The Agriculture Census (2011) reveals that the average size of operational holdings has declined continuously from 2.28 43

Source: Agriculture Census, 2010-11.

The average size of operational holdings in the country has, thus, halved over the last four decades clearly indicative of a growing number of marginal and small farmers and has been accompanied by a 2.4 times increase in the number of marginal and small farmer holdings from 49632000 in 1970-71 to 117605000 in 2010-11. Further a substantial 85 percent of the holdings are marginal and small holdings in 2010-11, an increase of 15.6 percent, from 69.9 percent in 200506. Within the group of small and marginal holdings, the growth in marginal holdings has been significant at 10.91 percent whereas small operational holdings have grown by 3.55 percent. Alongside a decline has been witnessed in the number of holdings under semi-medium size (1.73 percent), medium (7.85 percent) and large size holdings (11.23 percent) between 2005-06 and 2010-11 at the All- India level.

A sizeable growth (greater than 10 percent) in the number of marginal holdings was observed in States such as Andhra Pradesh, Bihar, Chhatisgarh, Goa, Gujarat, Madhya Pradesh, Odisha, Punjab and Rajasthan in the five year period 2005-06 to 2010-11 (Agriculture Census, 2010-11).

Pattern of Land Use and Use of Major Inputs: The gross sown area in the country has shown an

HOMOECONOMICUS III increase since the 1960s and a marked increase was observed during the 1980s and a stabilization since then.The 2000s, though, have seen a marginal increase to a 189.3 million hectares. A stagnancy, however, can be observed in the average net sown area since the 1970s except for a slight increase in the average net sown area in the period 1991-2000 to 142.3 million hectares.

63204000 hectares in 1990-91 to 92575000 hectares in 2013-14. Besides the change in gross irrigated area varies substantially from year to year and once can observe cyclical patterns as well. A decline in gross irrigated area was observed from 1996-07 to 2002-03 to peak in 2004-05 followed by a decline till 2010-11 to a high of 4.5 percent in 2010-1 after which there has been a decline. In 2012-13, the growth in gross irrigated area was only by 0.9 percent.

At the State level, there is a substantial variation across the major producing States in the average gross sown area during the periods 1991-2000 and 200113. States such as Andhra Pradesh, Assam, Karnataka Maharashtra, Punjab and Uttar Pradesh have shown a marginal to moderate growth whereas Gujarat, Haryana, Madhya Pradesh, Rajasthan and West Bengal have seen a substantial growth in the gross sown area.There has been a substantial decline in the gross sown area in Odisha (by 17.5 percent) and Bihar(by 6.8 percent). The substantial decline observed in Orissa can be attributed to natural calamities such as floods and drought.

A comparison of the average gross irrigated area across major producing States indicates points to an increase in the average gross irrigated area in almost all major producing States except Assam (a decline of 58.3 percent) and Odisha ( decline of 4.5 percent).

The largest increase in gross irrigated area has been in West Bengal â&#x20AC;&#x201C; an increase of 53.7 percent between the 1990s and the period 2001-13 followed by Gujarat (41.2 percent) and Madhya Pradesh (32.7 percent).

Irrigation Water, like land and labour, is an essential input and there has been substantial investment in irrigation infrastructure especially canal irrigationsince independence. Area under irrigation and its growth remains a major concern for the sector. Although the ratio of gross irrigated to gross sown area in the country has shown a steady increase and has more than doubled since 1960-61, it is pertinent to note that in 2013-14 only 47.6 percent of the total gross sown area is irrigated. Further, in the period since 1990-91 there has been a marginal increase of about 1.46 times from

The NITI Aayog (2015) has noted that agriculture in 44

India is water intensive and uses 2-3 times the water used to produce one tonne of grain as compared to countries such as China, Brazil and the United States clearly highlighting the need to conserve water resources and improve efficiency in water use. Vaidyanathan (2006) points out that the focus of irrigation policy has been on increasing water supply through irrigation rather than on the sustainable and efficient use of the water.Further, the heavy subsidies provided on the canal water rates and on power tariffs for drawing groundwater have resulted in the overuse and/or inefficient use of water resources (Rao, 2005).

Given that water pricing for canal irrigation is low, it is essential that the price of water should cover atleast 50 percent of the operation and maintenance costs to ensure a sustainable and viable irrigation system.

Further, reform in the institutional structures such as participatory irrigation management and water user associations which manage and maintain canal systems need to be strengthened (Dev, 2016) The Pradhan MantriKrishiSinchaiYojana (PMKSY) introduced in July 2015 with an outlay of Rs. 50,000 crores across 5 years and an amalgamation of several on-going schemes with the tagline more crop per drop has rightly focused on improving efficiency in water use. Damodaran (2016) writes that investments in ponds, rural electrification and drip irrigation are crucial for improvements in water efficiency.

Although the potential and benefits of drip irrigation are large, it constitutes less than 5 percent of net sown area. The high initial capital cost of capital has been identified as the single largest hurdle in the adoption and expansion of drip irrigation. Hence reducing the initial cost of capital efforts, restructuring subsidies and promoting extension networks could be some of the measures undertaken to promote drip irrigation in the country (Reddy and Dev, 2006).

Area, Yield and Efficiency in Foodgrain Production: The implementation of the green revolution technologies led to self-sufficiency in foodgrain production.

The yield in foodgrain per hectare has increased by 2.92 times from 710 kg/hain 1960-61 to 2070 kg/ha in 2014-15 whereas area under foodgrain cultivation has increased by about 1.06 times from 115.59 million hectares in 1960-61 to 122.00 million hectares in 2014-15. Further, a cyclical pattern can be observed in the area under foodgrain cultivation over the period 1960-61 to 2014-15. Area under foodgrain cultivation increased from 1970-71 to 1995-96 after which a stagnation can be observed till 2005-06. An increase in area can be observed in 2010-11 and since then area under foodgrain cultivation has been alternating 45

with an increase and decrease till 2014-15. An analysis for the period 1990-91 to 2014-15, points out that while foodgrain yield has shown a steady rise and increased by 53.6 percent there has been a marginal decline in the area under foodgrain cultivation of 10.96 percent.

A decomposition of foodgrain cultivation indicates a substantial increase in the yield in cereals production which is more than double that of the pulses. While yield in cereals increased by 3.15 times that in pulses increased by 1.4 times over the period 1961-2014.

Likewise area under cultivation of cereals increased by 1.08 times whereas area under cultivation of pulses increased by only 0.98 times over the same period.

HOMOECONOMICUS III Further, an analysis of efficiency in foodgrain cultivation over the period 1961-2014 revealed that although efficiency has always been above 0.90, there has been a decline in efficiency since 1990.

There are also wide differences in the yields within states. Even the best of the states have much lower yield in different crops when compared to the best in the world (see Table below).

Crop Yield Comparison: India versus the World India Highest Yield World Highest Crop (State) Yield Paddy Punjab - 3952 China - 6661 Wheat Punjab - 5017 UK - 7360 Maize Tamil Nadu - 5372 USA - 8858 Andhra Pradesh Chickpeas Ethiopia - 1663 1439 Cotton Punjab - 750 Australia - 1920 Rapeseed/ Mustard Gujarat - 1723 UK - 3588 Seed Note: Figures are in yields (kg/hectare) and pertain to 2012.

The sectoral deployment of non-food gross credit is clearly indicative of the inadequacy in credit allocaSource: Economic Survey 2014-15. tion from institutional sources given the low share of Capital Formation and Agricultural Credit from Insti- agriculture and allied activity (12.8 percent) in total tutional Sources credit allocation by commercial banks. Interestingly, Studies such as Rath (1989), Shetty (1990), Mishra more than 40 percent of the non-food gross credit (1996), Gulati and Bathla (2001) and Sawant et.al goes to the services and personal loans segments.

(2002) have highlighted the declining trend observed in gross capital formation since the 1980s particularly the changing inter-relationship between public and private investment in agriculture. Sawant et.al (2002) have shown that public sector investment (at 1993-94 prices) in agriculture has declined from 35.02 percent in 1980-81 to28.04 percent in 1997-98 and has been offset by an increasing in private sector investment which has increased from 64.98 percent in 1980-81 to 71.6 percent in 1997-98. The figures below indicate that this declining trend has continued through the 1990s and 2000s as well. Further except for the period 2005-08 gross capital formation by the private sector exceeds that of the public sector.

In the period 2007-08 to 2014-15, the share of agri46

culture and allied activity has stagnated between 12.8 and 13 percent. Likewise a stagnation in credit to the services sector has also been observed (around 24 percent) whereas the credit to industry has seen an increase from 40 percent in 2007-08 to a peak of over 45 percent during 2011-12 to 2013-14 and a marginal decline to 44.3 percent in 2014-15.

markets for agricultural commodities.

(Government of India, 2015) Linked is the issue of agri –warehousing facilities, storage and logistic assistance for value added services help such as grading, food processing, etc. which will enable farmers reduce the loss from the wastage of agricultural produce. The supply chain gaps has resulted in a wastage/loss anywhere between 19-40 National Market for Agriculture and Warehous- percent of fruit and vegetable production and the ing cum Storage Facilities post-harvest losses are estimated at nearly Rs.58,000 The country has a plethora of fragmented agricultural crores annually. Indian farmers realise only 30-35 permarkets which are regulated by State specific Agricul- cent of produce value as compared to 65-70 percent tural Produce Market (APMC) Acts. Currently, there realised by their counterparts in developed nation. are 2477 principal APMCs and 4843 sub-market yards in the country. Each of the APMCs can impose a mar- Agri-warehousing constitutes about 15 percent of ket fee on buyers, a licensing fee from commission the warehousing market in India. However, given that agents apart from other levies and market charges agricultural production is increasing and that India is a which varies widely across States. The imposition of leading importer of fruits and vegetables undermines such statutory levies/mandi taxes, VAT etc. have re- the need to have adequate and good warehousing sulted in market distortions. Besides there exists a and storage facilities. Although the gap in warehouse complete lack of transparency and accountability in capacity has been declining in 2014-15 the gap bethe market fees collected and utilized by the APMCs. tween storage required and availability is about 316 The model APMC Act (2003) sought to provide some lakh metric tonnes. freedom to farmers to sell their produce directly in Further, warehouse receipts can also smoothen the market/sponsors as well as increase the competi- farmers’ access to credit and a negotiable waretiveness of the market by allowing the registration of house receipt system will help farmers’ access loans market intermediaries as also perceived the APMC as from banks against produce deposited in licensed an arm of the State and the market fee as a tax lev- warehouses. The National Warehousing Act (2007) ied by the State rather than as a fee imposed by the made warehouse receipts negotiable but the lack of concerned APMC which has proved to be a major licensed warehouses has been a dampener. Anothhurdle in the adoption of the model APMC Act. Con- er feature of the of the agri-warehousing segment sequently, several States partially adopted provisions is the dominance of large public sector players like of the model APMC Act and the Centre has been the food Corporation of India, Central Warehousing trying to persuade State governments to adopt the Corporation and State Warehousing corporations model APMC Act (2003) in the spirit of co-operative which together contribute to around 70 percent of federalism. agri-warehousing capacity in the country. Over the It is imperative to create a National Market for ag- last decade with support from NABARD small and ricultural commodities and several steps apart from mid-sized godowns with a storage capacity of 1000 reorientation of State APMC Acts could help create metric tonnes have been constructed by farmers’ a national market such as keeping fruits, vegetables, themselves so as to avoid distress sales and there foodgrains and oilseeds out of the purview of the is a need to construct several more such low cost APMC; provision of policy support to the private sec- godowns which will benefit small farmers. Alongside tor for setting up infrastructure in warehousing, cold the past decade has also seen the emergence of a few storage grading facilities etc. which can induce great- large private players in this segment as providers of er competition in the sector. Since the investment re- an integrated supply chain and value added services quirement would be large, foreign direct investment with state of the art facilities and logistics. could play a crucial role in providing the requisite investment and infrastructure. APMCs would then just CONCLUSIONS be one among many options available for the farm- The focus of agriculture development in India has alers to sell their produce. However, the mandatory ways been on pre-harvest technologies so as to enrequirement of buyers having to pay APMC charges hance production. Although the emphasis of the ireven if the produce is sold directly outside the APMC rigation policy has been on increasing water supply, area has hindered the creation of national/State level only 47.6 percent of the gross sown area is irrigated.

47

HOMOECONOMICUS III Consequently, more than 50 percent of the gross sown area is rain-fed with farmers dependent on the monsoon. Improved irrigation facilities can help increase yields and cropping intensity and reduce farmer risk to the vagaries of nature. The Prime Minister’s KrishiSinchaiYojana and the Long Term Irrigation Fund to be created under NABARD with an initial corpus of Rs.20,000 crore will go a long way in alleviating seasonal agrarian distress. MNREGA has contributed to increasing rural wages and income and assured employment availability in rural area and the assets created under this scheme have been well targeted, it is essential to scale up operations and concentrate on creation of assets such as roads, micro-irrigation and water management which will help improve rural incomes. The government proposes to develop 5 lakh farm ponds and dry wells in rainfed areas under MGNREGA and this will have a positive impact on pro- Swati Raju is an Associate Professor with the Departduction as well as rural incomes.

The provision of modern post-harvest technologies including warehousing, storage and value added services can reduce farmer losses from wastage. Farmers can also benefit from price discovery and hedge their risks and a suitable e- platform can help farmers get the best price for their produce. The KisanSuvidha and PUSA Krishi apps along with Kisan call centres will go a long way in ensuring farmers get expert advice weather, input dealers, market price, plant protection and other expert advisories.

Further, the rationalisation of subsidies and better targeting of beneficiaries through direct transfers wouldgenerate part of the resources for the public investment that is essential in research, education,extension, irrigation, water-management, soil testing, warehousing and cold-storage and ensure that the country is able to achieve a sustained agricultural growth of 4-5 percent.

ment of Economics (Autonomous), University of Mumbai and her research interests include Public Finance; Developmental issues. She was a student of Ruia College from 1985-1990 and graduated in B.A. (Economics) in 1990. She did her Master’s and doctoral studies at the University Department of Economics.

NON-LINEARITY BETWEEN INFLATION AND GROWTH:

The Indian Experience This paper was presented at the NMIMS Sarla Anil Modi School of Economics Annual National Conference-Research Colloquim, February 2017 In line with the recommendations of the Urjit Patel Committee,The Reserve Bank of India has formalized inflation targeting as the chief objective of monetary policy. Accordingly, a 4% target for consumer price inflation with a 2% window on either side has been set. It is in that context that I proceed to study the non-linear relationship between inflation and growth.

The non-linear model states that that there exists a threshold inflation rate, which acts as an inflexion point, beyond which inflation becomes inimical to growth. I employ qualitative statistical analysis to evaluate the Indian experience of non-linearity between 48

inflation and growth. Among other things, the model studied suggests that the Indian economy has experienced above average growth rates at rates of Consumer Price Inflation and inflation calculated by the GDP Deflator as high as 8%. The model exhibits few weaknesses which bring into question the robustness of the results, opening scope for further research. I engage with all of these factors as the paper progresses. This exploration is preceded by a discussion on inflation and its costs, to better place in perspective the research that has been eventually presented.

DOES INFLATION HURT? Inflation, in words of Kaushik Basu, is the most dreaded and misunderstood of economic phenomena, or what he calls the ‘emperor of economic maladies’. It must be acknowledged, that inflation is of the most

significant of economic developments since it impacts the entire bulk of the population in a visible way. Inflationary pressures have sociological, psychological, and political apart from economic consequences.

Historically, inflation has been recorded to have shot up well to a trillion percentage points, as in Hungary in 1946, or in Germany in 1923. Between August 1945 and July 1946, the cost of one pengo in Hungary equaled that of 38,000-that is, a (3.8 X 10^27) rally of prices (Basu, 2011).Inflation in India though has been nowhere near, and the economy hasnâ&#x20AC;&#x2122;t encountered hyperinflationary pressures.

Inflation reduces the real value of debt. Ex-ante inflation can also encourage people to prefer holding capital than holding a volatile currency, thus upping investment in the short term. Inflation may even act as a stimulant, signaling economic activity. However, the costs of high inflation are too large to allow it to become a policy instrument at the hands of a government knee-deep in debt.

Inflation implies a rise in the general price level, which increases the nominal value of consumption baskets across the board for all income groups. Consumers then face a choice. A) The consumer must reduce real consumption to maintain the nominal value of the consumption basket equivalent to its nominal value in the pre-inflation period. B) The consumer must expend more in nominal terms to maintain the real value of the consumption basket. The consumer thus faces a trade-off between maintaining the real amount of consumption and maintaining the nominal value of expenditure. Choice A must be more feasible for the (relatively) higher income bracket, which can reduce nominal expenditure on superfluous consumerism. Choice B becomes the default choice which lower income brackets have to make as their consumption basket includes negligible superfluous expenditures. In developing countries like India where a super-majority falls in the lower income brackets, aggregate purchasing power is dampened.

Higher nominal expenditures mean lesser savings available for investment, and dampened investment brings economic slowdown.

Inflation disturbs the price mechanism (Lucas, 1973).

As prices continually rise, market participants do not receive the supply and demand signaling that is necessary for tending toward equilibrium. Most importantly, inflation signals the absence of the governmentâ&#x20AC;&#x2122;s control over the macroeconomy (Fischer, 1993). The governmentâ&#x20AC;&#x2122;s inability to manage the economy pollutes the enabling environment for growth, deterring investment. An investor investing in long term projects during high inflation periods 49

through long term borrowing must factor in the risks from rapid disinflation (Freedman and Laxton, 2009).

Even in the case of high inflation in absolute terms, a reduction to reasonable inflation implies a degree of disinflation, and it is the relative change that hurts the investor through the debt-deflation mechanism.

Inflation hurts export competitiveness in the event that it remains higher than the inflation in trading partners. The export lobby then raises the clamor for intervention in the forex market to depreciate the currency. While cheap exchange rates offset the assault on exports, they inflate the price of imports.

For India, which an importing economy, this typically widens the current account deficit, plunging the economy deeper into debt. Even for non-import oriented economies, inflation still effects a downward bias onto the current account balance, given the globalized economy provides the import route to raising supply which can calm rising prices.

Lastly, inflation is unequal in its treatment of different income groups (Mohanty, 2014). Given that consumption among lower income groups is inelastic, the cost of inflation is higher to the poor. The resulting exacerbation of inequality must be of concern from the socio-economic perspective, notably to an economy which has a massive unorganized sector.

The arguments presented establish that inflation does hurt. The obvious question that follows is how much? Is 10% inflation as harmful as 4% inflation?

Should the monetary authority try to bring inflation down from 20% to 19%, or to 10%, or further down to 6%?

HOW MUCH INFLATION DO WE WANT? There is general agreement in literature that high inflation is inimical to growth in the long run. In understanding what the ideal rate of inflation for an economy would be, it was discovered that the short-run relationship between inflation and growth is actually non-linear. At low rates of inflation, the impact on growth shall be either positive or neutral, while at high rates, the impact would be negative. It follows that in principal, it is possible to discover an inflexion point beyond which the inflation-growth relation assumes a negative nature. (Khan and Senhadji, 2001).

A large amount of research has been carried out in the direction of identifying a threshold rate of inflation, beyond which the inflation-growth relationship becomes negative, some of which I shall be reviewing here.

Fischer (1993), whose work on the topic has been lauded as seminal, endeavors to study the role of macroeconomic factors in growth. Fischer attempts to gauge macroeconomic stability by looking at infla-

HOMOECONOMICUS III tion, government deficit and black market exchange rate premia, and proposes that macroeconomic instability hurts the economy through uncertainty. He observes non linearity in the inflation growth relationship and confirms the view that inflation harms growth through the channel of uncertainty and reduced investment that follows. Further panel regressions that he conducts note that while low inflation and thin budget deficits are not necessary for high growth, in most cases, sustained growth is not consistent with high inflation. One of the conclusions derived in his regressions is that moderate inflation may be sustainable, thus reinforcing the non-linearity argument.

Bruno and Easterly (1995) do not find any tangible association between inflation and growth except that high inflation rates constitute crisis that dampen growth. Growth is seen to show a rapid recovery once inflation has been controlled. They conclude that the costs of inflation only become significant at high rates of inflation, while at lower rates well up to 20%, inflation and growth do not show any consistent pattern. This finding also supports the uncertainty over causality raised by Fischer (1993). At lower inflation rates, the causation may run from external supply shocks or other exogenous factors that perturb both inflation and growth, while the result of lower growth may not necessarily be a function of inflation.

Sarel (1998) uses a panel of 80 countries from 1970 to 1990 and computes a threshold rate of inflation at 8%. Khan and Senhadji (2001) compute a threshold inflation rate of 1-3% for industrialized countries and 11-12% for developing economies by conducting econometric analysis using a panel of 140 countries.

regard, we must note the inflexion point of 6% inflation suggested by Rangarajan (1998) and Vasudevan (1998) and the 4% inflexion rate proposed by the Chakravarty Committee (1985).

The contribution of this paper to the research carried out in this area is the introduction of an alternative model in the understanding of the growth-inflation nexus. Much, rather, all of the research reviewed above employs econometric, quantitative techniques in approaching this problem. However, I seek to approach the problem using qualitative, attributive techniques, in an effort to provide a perspective that has not been employed in the study of this issue in much of the literature. The research also attempts at suggesting a method to evaluate threshold inflation rates for new series of data using qualitative data analysis. The country-specific nature of the paper makes a deeper treatment of the problem possible. Here, I differentiate between pre-reform data and post-reform data for inflation and growth and evaluate the non-linearity between inflation and growth for these two periods separately.

OBJECTIVES OF THIS PAPER In this paper, I shall employ the statistical instrument of the Yuleâ&#x20AC;&#x2122;s Coefficient of Association (Q) (Yule G.U, 1900) to check the nature of the relation between inflation and growth as India has experienced it in the context of the non-linear model. The model presented here seeks to apply categorical, qualitative analysis to economic data. Further, how do different inflation thresholds perform for latest data? How robust will this model emerge? It is along these lines that the The panels used by the above authors do not leave paper will progress. scope for differential thresholds for different economies. Das and Loxley (2015) attempt to depart from METHODS EMPLOYED the trend of viewing all developing countries as a The research presented further utilizes data on single entity, and device thresholds for Latin America growth calculated as growth rate of GDP at 2010 and the Caribbean, Sub-Saharan Africa and Asia. They constant prices, sourced from the World Bank arplace the threshold rate of inflation for Asia at 11%. chives (1960-2015). The same source has been used However by perceiving Asia as a single entity, Das for figures on the rate of inflation, calculated using and Loxley do not factor in the economic diversities the GDP deflator. within the continent that lead to substantial differ- Growth and inflation data have been classified unences in the institutional arrangements and economic der two heads-pre-reform data and post-reform data. scenarios among different countries.

The rationale behind this elicits some explanation.

The Indian economy liberalized in 1991. This change Given the uniqueness of each economy in terms of ushered in multiple corrections in the manner that the sources of inflation, the composition of imports the economy worked, with major implications for the and deficits on the current account, the supply bot- dynamics of inflation. For instance, the import route tlenecks, socio-political institutions, etc., country spe- to matching rising demand and holding down priccific inflation thresholds become important. In that es wouldnâ&#x20AC;&#x2122;t have been as influentially dictated by the 50

market before the reforms. Mohanty (2015) describes the evolution of monetary policy in India; a description that throws light on the policy approaches to inflation. For instance, permanent deficit monetization by the RBI was dropped post 1996, making way to greater central bank autonomy, government that would have to portray tougher fiscal prudence and an economy that became more willing to allow the market to operate by raising the pressure upon the government and the RBI to maintain macroeconomic stability. Similarly, participation in the financial sector, use of credit, etc. though still limited increased significantly relative to the pre-reform period. All these and many more shifts make the pre-reform economy fundamentally different from the post-reform economy from the institutional, political and socio-economic perspective. Thus, it is only appropriate that the two economic bodies be treated differently, so as to aid generating more accurate results and enable comparative analysis.

The model has been run independently for pre-reform and post-reform data, with a set of threshold rates.

The Yule’s Coefficient (Yule, G.U., 1900), which is the principal statistical instrument deployed for the purpose of this paper, gauges the nature and extent of association between two variables. In this case, theoretical models reviewed typically describe a non-linear inflation growth relationship.Thus, the two variables that we want to observe will be growth and inflation. But non linearity suggests a positive or neutral relation between inflation and growth below a certain threshold and a negative relation above that threshold. Thus, the variables subject to analysis are-‘high growth’ and ‘low inflation’. However, ‘high’ and ‘low’ are relative terminologies, and statistical analysis would require some concrete objective classifications.

Hence, the pre-reform and post-reform growth data were processed to give a simple average; one each for 1960-1990 and 1991-2015. The element of objectivity essential for running our model was brought in by this correction in the following manner. Now, it becomes possible to observe ‘high growth’ as ‘growth above the average’ (A) and ‘low inflation’ as ‘inflation below the threshold’ (B). Consequently, negation of the two variables is ‘below average growth’ (α) and ‘above threshold inflation’ (β). We expect a weak positive or strong positive association to appear between growth above the average and inflation falling below the threshold that appropriately describes the inflation-growth association experienced by India.We construct a contingency table as followsA α B AB αB β Aβ αβ AB is represented as number of years in the time series data when above average growth appeared to occur alongside below threshold inflation. αB is represented as the intersection between below average growth and below threshold inflation, gauging the instances when below threshold inflation did not usher in above average growth. A value in this field would be indicate that below threshold inflation was only conducive to growth but not sufficient for growth. Growth is premised upon several other factors that the model does not consider. Thus below threshold inflation is a necessary but not an adequate condition for growth.

Aβ suggests the number years when above average growth accompanied above threshold inflation. Lastly, αβ counts the number of years below average growth and above threshold inflation came together.

The association coefficient will be calculated following the model statistically described asQ = (AB)( αβ) – (Aβ)( αB)/ (AB)( αβ) + (Aβ)( αB) 0<Q<1 suggests a positive association between A and B, which would result when the threshold rate maintains non-linearity between inflation and growth. -1<Q<0 would suggest a negative association which would result when the threshold rate of inflation fails to maintain non-linearity between inflation and growth. Mod of Q indicates the extent of association. Coefficients were accordingly calculated for the two datasets using the threshold rates established by Das and Loxley (2015), Khan and Senhadji (2001), Rangarajan (1998) and Vasudevan (1998) (as cited in Kannan and Joshi, 1998) and for the upper bound of the bracket of 2% to 6% inflation that was assumed to be the RBI’s threshold inflation rate (Urjit Patel Committee). Note that these coefficients were calculated separately for the two data sets-pre-reform and post-reform. In line with the inferences of Bruno and Easterly (1995), it was observed that the inflation growth association is better observed when the frequency of data is very high. High inflation may leave a mark on the long run average inflation rate, however growth is observed to rebound once high inflation has been controlled. Thus, average growth rates over the long run do not reflect the downturn caused by inflation, and the inflationary impact on output growth is temporary than permanent. Thus data in this paper was organized yearly because high 51

HOMOECONOMICUS III frequency data would better enable us to see the inflation-growth relation.Yule’s Coefficient of Association is an instrument of utility in categorical analysis, that is, when attributes are being studied than variables. While inflation as well as growth is expressed as quantitative data, here, the classification is being made on the basis of growth falling above or below the average and inflation falling above or below the threshold.Thus, the characteristic of a particular variable falling below or rising above a given level enables a binary classification.Thus, inflation or growth rate is assigned the attribute of falling below the threshold and rising above the average.

This makes categorical analysis possible.

RESULTS AND OBSERVATIONS The Yule’s Coefficients of Association (Q) computed have been tabulated in table 1.1.

TABLE 1.1 TIR DP Deflator Data GDP Deflator Data CPI DataQ(pre-reCPI Data Q(pre-reform) Q(post-reform) form) Q(post-reform) 8% 0.18 0.6 -0.26 0.23 11% 0.71 1 -0.46 0.56 6% -0.1 0.34 0.17 0.08 4% 0.33 -0.08 -0.25 0.16

The model was run for CPI data only for the purpose of observation, and for the 6% and 4% inflexion rates (more on this later). For all other TIRs, coefficients established using GDP Deflator inflation since these rates better describe the association between inflation and growth. CPI measures inflation for a much narrower range of goods while growth is calculated for the entire economy. Hence any comparison must be between inflation calculated for the entire economy and growth.

The observations presented henceforth concentrate only on the first two columns, i.e., GDP Deflator inflation data, unless otherwise mentioned.

Below 8% TIR (Threshold Inflation Rate), the association between inflation and growth in is seen to be strongly positive in the post-reform period; meaning that there is has been strong association between blow 8% inflation and above average (6.5%) growth. The degree of association is observed to be lower, but positive nevertheless in the pre-reform period. Prima facie, high growth and low inflation in the post reform period look perfectly associated with a coefficient of 1 when the TIR is 11%. Similarly, the pre-reform association also appears high. Understanding the degree of reliability of this association would require a farther excursion into the data, and that exercise has been undertaken in the following section. For post-reform GDP deflator inflation-growth associations, the coefficient fell as the threshold rate selected was lowered. Such a descending trend was not observed for CPI data or for pre-reform data calculated using both, CPI as well as GDP Deflator Inflation. w.r.t. the pre-reform data for inflation calculated by the GDP deflator, it was observed that below average growth and above threshold inflation shared a positive relation for a threshold of 8% and 4%, however, these two attributes shared a negative association for a threshold rate of 6%. It is also important to note the incidence of negative association between above average growth and below threshold inflation for 6% TIR in the pre-reform period and for the 4% TIR in the post reform period.

ANALYSIS Firstly, data reveal that 8% and 11% TIRs produce positive associations between AAG (Above Average Growth) and Below Threshold Inflation (BTI) for pre-reform as well as post-reform periods. In this analysis, we shall concentrate on the post-reform figures more, as status-quo is a subset of that period. To check the robustness of the 11% TIR yielding the perfect positive AAG-BTI association, we draw the contingency table for A (AAG) and B (BTI) for the 11% TIR. TABLE 1.2 (PRE-REFORM PERIOD) A α B 15 10 1 4 β 52

TABLE 1.3 (POST REFORM PERIOD) A Total α B 15 9 (B)=24 0 1 β (β)=1 Table 1.3 consists of the data for which the post-reform association between AAG and BTI appears to be perfectly positive. The data tabulated show that the frequency of incidence of above threshold inflation when the threshold of 11% is applied to the 25-year span 1991-2015 is just 1(β = 1). Thus, the threshold of 11% is actually greater than average inflation per year post 1991, except for inflation in 1991 itself. On the solitary instance when inflation surged above the 11% threshold, growth was observed lower than average (1.06<6.5). Thus the value for Aβ is zero and that for αβ is one, while the total of β is one.

While the statistical impact of this phenomenon produces a perfect association, the conclusion would be based not on a trend, or a set of observations, but on a single incident. Though the result suggests that the Indian economy could tolerate inflation up to 11% and yet continue to grow above average rates in the post-reform period, this conclusion would have been more robust had there been more instances of inflation rising above the 11% threshold to observe.

Table 1.2 provides a more compelling argument that the 11% TIR held true for the pre-reform period, as it provides the highest positive association among all threshold rates. Further, the contingency table is seen to have a reasonable distribution of the data. Similarly, it is seen that the 8% threshold produces a reasonable distribution of observations for the post-reform growth-inflation data, making the 0.6 coefficient observed in the table more reliable.

We now proceed to explain the incidence of negative associations that have been observed at two positions in the Table 1.1.

TABLE 1.4(PRE-REFORM) A α B 5 5 11 9 β

contingency tables for both these have been drawn up above. A negative association between above average growth and below threshold inflation implies that the former is not associated with the latter. Extrapolating further, it implies that the given threshold, in the context of the given economy, for the given data set is either too high or too low. Thus, there are significant numbers of instances in recorded observation where either above average growth accompanied above threshold inflation (Aβ), or below average growth accompanied below threshold inflation (αB), making the multiplication of (Aβ) (αB) greater than the multiplication of (AB)( αβ), and the consequent subtraction of these two in the numerator, negative.

We can postulate, that if, given a negative association, (Aβ) >(αB), the defined threshold is too low for the given time series data, as there are several instances where inflation greater than the threshold accompanies growth higher than the average.Thus, the economy is being able to sustain high growth levels at rates of inflation higher than the threshold. So certainly, the threshold being studied is low and the actual threshold where non-linearity in the inflation-growth relation is observed is higher up. This postulation is defeated when we look at the coefficient at TIR of 4%, for the same pre-reform data series, which is positive.

If 6% is too low a threshold, how can 4% yield a positive association?

TABLE 1.6(PRE-REFORM) A α B 4 2 12 12 β Table 1.6 is the contingency table for pre-reform data when the inflation threshold is 4%. Though (Aβ) >(αB), and 4%<6%, the association is positive. The association coefficient so obtained is positive because there are 3 more instances when below average growth accompanies above threshold inflation leading the numerator to become positive.

The model constructed here thus, can only indicate whether a given threshold describes the inflation-growth non-linearity in context of the given data accurately. The paradox of a 6% threshold rate yielding a negative coefficient but an 8% and 4% threshold yielding a positive association cannot be explained by TABLE 1.5(POST-REFORM) this model.

A α However, there are some observations that this modB 4 3 el can indeed make given the components of the con11 7 β tingency table. If a given data set is observed to have A negative association of -0.1 is observed for pre a positive association between below threshold inflareform data using TIR as 6% (Table 1.4) and of -0.08 tion and above average growth, we can check whethfor post reform data using TIR as 4% (Table 1.5). The er the positive association has a greater contribution 53

HOMOECONOMICUS III from low inflation and high growth (AB) or from high inflation and low growth (αβ). Theory suggests that AB may or may not occur, but αβ must always occur. This is seen to be true in a majority, though not all, of the contingency tables drawn up in the course of research for this paper. In the multiplication (AB) (αβ), (AB)<( αβ) in most cases. Similarly, if the association is negative, we can check whether the negativity derives more from the incidence of low inflation and low growth (αB) or from high inflation and high growth (Aβ). The case for having assumed the wrong threshold may be stronger when (Aβ)> (αB), as even if the threshold were correct, low inflation is not a sufficient condition for bringing about high growth and hence low inflation accompanying low growth is very much a possibility.

It is useful also to observe that as the threshold inflation rate is changed, the B and β totals change.

However, the A and α totals remain constant, as the average growth rate remains unchanged. Thus, any mobility of numbers takes place vertically and not horizontally, since the A and α totals are not changing with changes in the inflation threshold.

Applying this rule, we see as that as the threshold is pulled down, the β total increases since there are more instances of inflation exceeding the threshold.

The implication of this is that Aβ and/or αβ totals increase whereas AB and/or αB decrease relative to each other. This has no impact on the positive or negative nature of the coefficient of association as the coefficient is calculated through diagonal multiplication and subsequent subtraction. The two terms (AB)( αβ) and (Aβ)( αB) pick one each out of the pair of decreasing Bs and increasing βs so that coefficient is not biased in any manner.

The wide difference between coefficients using inflation calculated by the GDP Deflator and those using the CPI inflation figures must be noted. Thus, an x% GDP Deflator inflation rate as a threshold led to significantly different outcomes in terms of growth than a threshold of x% CPI inflation.

Lastly, we consider CPI data on inflation for the reason that Indian monetary policy has shifted in recent times to targeting CPI-based inflation. Most of the thresholds constructed here have not been constructed exclusively for any particular consumption basket. Hence, the extent of association for the 8% and 11% threshold, established by Sarel and Das and Loxley, Khan and Senhadji would not be as robust for CPI-inflation data. However, since the 6% upper bound to inflation has been suggested by the RBI, we can consider the association between below 6% CPI inflation and above average post reform growth to 54

be indicative of whether the RBI has indeed set a target below which inflation has been conducive to sustained growth. Thus, the model described in this paper is run for CPI post reform data with 6% as the threshold rate. The coefficient 0.08 shows a weakly positive association. With inflation consolidated under 4%, the association coefficient becomes more robust at 0.16.

CONCLUDING REMARKS The Yule’s Coefficient of Association has been implemented in this paper to study the Indian experience with the non-linearity between inflation and growth.

It can also be used to check inflation thresholds for different series of data. With new GDP calculation techniques, base year changes, thresholds would typically require correction. Finding associations can greatly help in establishing thresholds for different economies and for different series of data.

The results of this paper are derived using the latest figures put out by the World Bank.The study is country specific, and hence can afford to make distinctions between periods, in this case, between pre-reform data and post-reform data, granting a deeper insight into the manner in which the inflation-growth relation within the country has evolved.

The results confirm that the target rates of CPI inflation (4% post-reform) set by the RBI do exhibit a positive inflation-growth association when assumed to be the threshold. They suggest that the Indian economy has grown at above average rates with even higher rates of inflation calculated using the GDP Deflator (8% post-reform).

As seen in the paradox of 4% and 8% thresholds establishing a positive association between inflation and growth even as the 6% threshold yields a negative association, the model fails to explain whether a threshold producing a negative association is too high or too low. It also fails to establish in a considerable manner, the causality from high inflation to low growth and only describes association.

Does this analysis of the inflation growth trade-off suggest that the target rate of inflation must equal the threshold rate? It does not. The non-linear relationship between inflation and growth merely shows how growth responds to inflation. It speaks for the possibility of a positive (or neutral) inflation growth relationship below a threshold. Inflation however has costs which may even persist alongside high growthfor instance, distributional inequality, expectations getting adapted to higher and higher inflation making people risk-averse, etc. The non-linear model does

not gauge these and several other socio-economic, socio-psychological and political costs of inflation.

REFERENCES Basu, Kaushik, 2011, ‘Understanding Inflation and Controlling It’, Economic and Political Weekly,Vol. 41, October Bruno, Michael and Easterly, William, 1995 ‘Inflation Crisis And Long Run Growth’, National Bureau of Economic Research, Working Paper 5209, August, Das, Anupam and Loxley, John, 2015, ‘Non-linear Relationship between Inflation and Growth in Developing Countries’, Economic and Political Weekly,Vol. 37, September, Fischer, Stanley, 1993,‘The Role of Macroeconomic Factors inn Growth’, National Bureau of Economic Research, Working Paper 4565, December, Kannan, R and Joshi, Himanshu, 1998, ‘Growth-Inflation Trade-off’, Economic and Political weekly, Oct.17-24 Khan, Mohsin and Senhadji, Abdelhak, 2001, IMF Staff Papers,Vol. 48 Mohanty, Deepak, 2014, ‘Monetary Policy: Managing Inflation, Fostering Growth’, chp. 12, ‘Politics Trumps Economics’, Rupa Publications Pvt. Ltd. ed. Bimal Jalan and Pulapre Balakrishnan Sarel, Michael, 1996, “Nonlinear Effects of Inflation on Economic Growth,” Staff Papers, International Monetary Fund,Vol. 43, March Yule, G.U, 1900, ‘On the association of attributes in statistics’, Philosophical Transactions of the Royal Society A ,75, 257-319 WEBSITES REFFERED data.worldbank.org www.imf.org/en/data https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2798022/

DATA APPENDIX Fiscal Year Growth Inflation GDP Deflator 1961 3.72 2.15 1962 2.93 4.41 1963 5.99 8.35 1964 7.45 8.55 1965 -2.04 8.3 1966 -0.55 13.3 1967 7.83 8.62 1968 3.39 2.42 1969 6.54 3.34 1970 5.16 1.56 1971 1.64 5.32 1972 -0.533 10.8 1973 3.3 17.8 1974 1.19 16.7 1975 9.15 -1.65 1976 1.66 5.98 1977 7.25 5.64 1978 5.71 2.46 1979 -5.24 15.7 1980 6.74 11.5 1981 6.01 10.8 1982 3.48 8.1 1983 7.29 8.55 1984 3.82 7.92 55

1985 1986 1987 1988 1989 1990

5.25 4.78 3.97 9.63 5.95 5.53 Average=4.233233333

Fiscal Year

Growth

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1.06 5.48 4.75 6.66 7.57 7.55 4.05 6.18 8.85 3.84 4.82 3.8 7.86 7.92 9.28 9.26 8.61 3.89 8.48 10.3 6.64 5.62 6.64 7.24 7.57 Average=6.5568

Fiscal Year 1961 1962 1963 1964 1965 1966 1967 1968 1969

Growth 3.72 2.93 5.99 7.45 -2.04 -0.55 7.83 3.39 6.54

7.19 6.79 9.33 8.23 8.44 10.7

Inflation GDP Deflator 13.8 8.97 9.86 9.98 9.06 7.58 6.48 8.01 3.07 3.64 3.22 3.72 3.87 5.73 4.24 6.42 6.92 8.66 6.06 8.98 5.24 7.85 6.23 3.3 0.995 Inflation CPI 1.75 3.58 2.94 13.4 9.48 10.8 13.1 3 0.575

HOMOECONOMICUS III 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

5.16 1.64 -0.533 3.3 1.19 9.15 1.66 7.25 5.71 -5.24 6.74 6.01 3.48 7.29 3.82 5.25 4.78 3.97 9.63 5.95 5.53 Average=4.233233333

5.1 3.08 6.46 16.3 28.6 5.74 -7.63 8.32 2.52 6.25 11.4 13.1 7.89 11.9 8.32 5.56 8.73 8.8 9.38 3.26 8.97

Fiscal Year 1991 1992 1993 1994 1995 1996 1997 1998

Growth 1.06 5.48 4.75 6.66 7.57 7.55 4.05 6.18

Inflation CPI 13.9 11.8 6.36 10.2 10.2 8.98 7.16 13.2

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

8.85 3.84 4.82 3.8 7.86 7.92 9.28 9.26 8.61 3.89 8.48 10.3 6.64 5.62 6.64 7.24 7.57 Average=6.5568

4.67 4.01 3.68 4.39 3.81 3.77 4.25 6.15 6.37 8.35 10.9 12 8.86 9.31 10.9 6.35 5.87

ARNAV DESHPANDE:I am a First Year BA student of Economics, Maths and Statistics at Ramnarain Ruia College, Mumbai. I love to read, debate, eat and sing, not necessarily in that order. I am a learner, and shall love any comments and criticisms on this paper mailed at arnavdeshpande98@ gmail.com. Many thanks to professors from the Economics Department, Ruia, for their guidance and comments on the paper.

Agricultural Credit Policy:

The Role of Institutional credit in Agricultural Development in India

56

Introduction The non-institutional source of agricultural credit predominated the Indian agriculture scenario before independence. The professional money lenders and landlords were the only source of rural credit available to the Indian farmers. But after independence, institutional credit has played an increasingly important role in the agricultural development of India. A variety of institutional agencies viz. the three tier cooperative structure, the Regional Rural Banks and particularly the commercial banks, have shouldered the responsibility of providing the much required institutional credit to the farmers having small, medium and large agricultural holding in the post nationalisation regime The share of commercial banks in rural and agricultural credit remained meagre at only 0.9 per cent in 1951-52 and 0.7 per cent in 1961-62 but in the last three decades the share of scheduled commercial banks in agricultural credit has risen steeply.

An attempt has been made in this brief analysis to assess the agricultural credit policy and the role of institutional finance in agricultural and rural development in past three decades.

ed as medium term credit for building small bunds on the farms, digging well etc. and also as long term credit for the purchase of machinery such as tractors, threshers, harvesters and also purchase of additional land. Another form of agricultural finance is called indirect finance, which does not go directly to cultivators but to institutions that support agricultural production in rural areas. The typical forms of indirect finance to agriculture have been loans to input dealers for their role in the provision of agricultural inputs and loans to electricity boards for supplying power to cultivators.

Institutional sources of Agricultural Credit The Reserve Bank of India, right from its inception in the year in 1935 highlighted the need for providing agricultural and rural credit. The three-tier structure of the co operative credit in India has had a long history of its existence with the Primary Agricultural Credit Societies at the grass root village level directly dealing with the farmers, Central Co operative Banks at the district level and the State Co operative Banks at the state level and it contributed a major share to agricultural credit for a long period. To further raise the access to organised sector credit, fourteen commercial banks were nationalised in 1969 and six more banks were nationalise in 1980. In the post nationalisation era under the banner of Priority Sector Credit and with a policy focus on ‘social and development banking’, the banking sector provided large amounts of credit to Indian farmers at concessional rates of interest. Thereafter, the share of scheduled commercial banks in the agricultural credit continued to rise phenomenally. The rural branches of commercial banks increased from 1443 in 1969 to 35134 in 1991, the agriculture received 18 per cent share in the total priority sector credit (of 40 per cent) and the credit was given to the farmers at an annual rate of 4 per cent which was 2 per cent below the bank rate.

In addition to this, the Regional Rural Banks were established in the year 1975 with a regional focus to provide credit to the farmers. Although the performance of the RRBs has not been very substantial, the share of the scheduled commercial banks in the agricultural credit in the Indian economy has increased substantially. The eventual decline in the non-institutional source and gradual increase in the institutional sources of agricultural credit is evident from the following figure.

Role of agriculture in Indian Economy The agricultural sector of India is one of the most significant sectors of Indian economy in terms of the percentage share in GDP and employment. Agriculture is the only means of living for almost two-thirds of the employable class in India. The agricultural sector also occupies almost 43 percent of India’s geographical area.

The Indian economy achieved near self sufficiency in food grain production in the late 1980’s itself with bumper production of cereals, pulses and oilseeds.

But the agricultural productivity in terms of per hectare output of food grains remained very low. And to raise the productivity in Indian agriculture, capital formation in the agricultural sector, use of appropriate modern technology and use of better inputs in terms of better seeds with help of bio-technology, for high yielding varieties of crops, better water management is mandatory. This requires investment at both macro and micro levels and without adequate and appropriate institutional finance possibly it cannot be achieved.

Need for Agricultural Finance Farmers require Productive as well as Consumption credit for short, medium and long time period.

The short term productive credit is required for purchase of seeds, fertilisers and is often provided as Figure 1: Share of Outstanding Debt of Rural Housecash credit or in kind. This is regarded as crop loan hold from Institutional and Non-Institutional Sources or direct finance. The direct finance is often extend57

HOMOECONOMICUS III 19912001 20022011

2.6

7.3

2.8

17.6

15.7

3.3

Source: ‘Basic Statistical Returns’, Reserve Bank of India, various issues.

Source: All India Debt & Investment Surveys, Various Issues, NSSO

The growing share of various institutional agencies in agricultural credit is evident from the following table.

The contribution of the scheduled commercial banks has increased consistently where as the share of cooperative credit seem to have declined in the recent years.The share of RRBs have more or less remained stagnant at below 10 per cent.

Table 1: Share of various Institutional agencies in Agricultural Finance (In Rupees Crores) Regional Rural Banks (RRBs)

Year

Total

198182

2109 (59.4)

168 (4.7)

1245 (35.0)

3553

199192

4763 (46.3)

526 (5.1)

4988 (48.5)

10277

200102

20923 (39.0)

4082 (7.6)

28709 (53.4)

53713

200809

42162 (17.5)

23866 (9.9)

174775 (72.6)

240803

Note: Figures in bracket show the percentage share of agencies.

Source: Economic Survey, RBI

The rate of growth of bank credit to agriculture, the rate of growth of total bank credit and the rate of growth of agricultural GDP in per cent over a period of nearly forty years is shown in the following table.

Table 2: Rate of growth of credit to agriculture, total bank credit and agricultural GDP, 1972 to 2011 (in per cent per annum) Annual Growth Rates (in %) Annual Total Agricultural Period Credit to Bank GDP Agriculture Credit 197216.1 8.4 2.3 1980 19816.8 8.0 3.5 1990 58

After 1991, the Committee on the Financial System (Narasimham Committee) recommended delinking monetary policy from the objective of redistribution.

It argued that banks should function on a commercial basis, and profitability should be the prime concern in their activities.Thus, banks were permitted to close rural branches, in the name of rationalisation of branch networks. The norms related to the priority sector lending were redefined and it was argued that banks should be given a free hand to charge rates of interest because it was argued that administering interest rates would lead to ‘financial repression.’ Financial repression is a situation where the degree of financial intermediation is weak due to negative real rates of interest on deposits and a large spread between borrowing and lending rates. As a result, it was argued, private savings and investments are discouraged in the economy.

In fact, the work of Joshi and Little (1998), two protagonists of economic reform in India showed that nationalisation of banks in 1969 was a major driver of financial intermediation. The share of deposits to GDP rose from 13 per cent in 1969 to 38 per cent in 1991 and the share of advances to GDP rose from 10 per cent in 1969 to 25 per cent in 1991.

Bank lending to agricultural severely suffered a serious setback in 1990s. During this period there was (a) large-scale closure of commercial bank branches in rural areas; (b) a widening of inter-State inequalities in credit provision, and a fall in the proportion of bank credit directed towards regions where banking was historically underdeveloped; (c) a sharp fall in the growth of credit flow to agriculture; (d) increased sidelining of small and marginal farmers in the supply of agricultural credit; (e) increased exclusion of the disadvantaged and dispossessed sections of the population from the formal financial system and (f) strengthening of the hold of moneylenders on rural debt portfolios.

In the 1990s, when India began to implement the policy of financial sector liberalisation, there was a significant slowdown in the growth of commercial bank credit to agriculture compared to the 1980s. After recording an annual rate of growth of 6.8 per cent between 1981 and 1990, agricultural credit grew at just 2.6 per cent per annum between 1991 and 2001.

The growth rate of agricultural credit in the 1990s was less than the growth rate of the rural population in the corresponding period. But later in the period after between 2002 and 2011, agricultural credit grew by 17.6 per cent per annum.

In 2004, the government announced its intent to double the flow of credit to agriculture over a period of three years. Increase in credit flow was an integral part of the so-called ‘New Deal for Rural India’, promised by the United Progressive Alliance (UPA) government. A “comprehensive credit policy” was announced in June 2004, which included the commitment to raise agricultural credit flow by 30 per cent every year, financing of 100 farmers per branch (thus, 50 lakh farmers in a year), two to three new investments in agricultural projects per branch every year and a host of debt relief measures, such as debt restructuring, one-time settlement and financial assistance to redeem loans from moneylenders and so on.

There was also an increase in the number of rural branches of commercial banks after 2006. Between 1995 and 2005, there was a closure of 922 rural bank branches across India. However, between 2006 and 2012, the number of rural bank branches sharply rose by 5,662: i.e., from 30,188 branches to 35,850 branches. Between 2004 and 2011, agricultural credit rose from Rs 96,245 crore to Rs 461,021 crore: an increase of Rs 364,776 crore.

Table 3: Average share of loans issued from various financial institutions towards Agriculture & Allied Activities

Year

Share of Cooperatives (percent)

Share of Commercial Banks (percent)

Share of RRBs (percent)

1975-76 to 199091

59.84

36.47

4.21

1991-92 to 200203

56.63

39.48

6.89

2003-04 to 201213

28.72

60.23

11.05

Source: Handbook of Statistics on Indian Economy, RBI

In the recent years in addition to farming, banks also lend for the development of allied activities of animal husbandry, fisheries, plantation, horticulture and so on. Commercial banks extend help for land reclamation, construction of cold storages, go-downs, and also provide basic loans against pledge of warehouse receipts to the farmers. Advances are given to 59

borrowers ranging from very small activities covering poorest of the poor to hi-tech activities involving large fund outlays. They have greatly contributed to agricultural finance in Indian economy in terms of timely and adequate supply of credit and modern and newer credit delivery systems.

Among all the commercial banks, the State Bank of India has been the pioneer and market leader in Agri-Financing in the country with a portfolio of more than Rs.1,20,000 crores in agri-advances covering more than 1.1 lakh farmer families. Apart from the general branches, SBI has 428 Specialized Agricultural Development Branches (ADBs) and 18 Agri-Commercial Branches (ACBs) for extension of high value credit to hi-tech agriculture, agri-related Small and Medium Enterprises (SMEs), Food processing industries, etc.

A review of performance of agricultural credit in India reveals that though the overall flow of institutional credit has increased over the years, there are several gaps in the system like inadequate provision of credit to small and marginal farmers, paucity of medium and long-term lending and limited deposit mobilisation and heavy dependence on borrowed funds by major agricultural credit purveyors. The initiatives in a diversified and disaggregated manner in many different segments of agriculture and agro industry: horticulture, aquaculture, dairying, sericulture, poultry, vegetables, meat, food processing, other agro-processing etc are the need of the day.

It is also necessary to see to it that need based and case specific subsidy should be given to the most needy small and marginal farmers rather than to all the farmers in general and the rich farmers in particular. The generalised loan waivers, which have been announced by governments from time to time, constitute a moral hazard and seriously impair the system as far as agricultural credit is concerned. Such waivers create expectations of future waivers of loan or interest payments and are a disincentive to pay back loans that farmers have obtained in the past. Expectations of rising defaults have led financial institutions to scale down their lending operations. General waivers have the potential to trigger a cycle of events that could dry up the channels of institutional credit.

Aadhar linked bank enabled delivery system will help in identifying and reaching out the needy in case of distribution of subsidies very soon.

References: 1.Economic Survey of Government of India, various issues.

2.Hoda Anwarul & Terway Prerna (2015), ‘Credit Policy for Agriculture in India – An Evaluation’ Working

HOMOECONOMICUS III 3.Paper No 302, Indian Council for Research on International Economic Relations.

4.Joshi Vijay and I. M. D. Little (1998), “India’s Economic Reforms: 1991-2001”, The Economic Journal, Vol. 108, No. 446 (Jan, 1998), pp. 196-200.

5.Mohan R (2004), ‘Agricultural Credit in India: Status, Issues and Future Agenda’, RBI Bulletin Nov, 2004.

6.Ramakumar R (2013),‘Bank Credit to Agriculture in India:Trends in the 1990s AND 2000s’, The Marxist, XXIX 3, July-September 2013.

7.RBI, Handbook of Statistics on Scheduled Commercial Banks.

MANASVI ABHYANKAR SYBA, Economics and Statistics St.Xaviers College (Autonomous) Mumbai.

CASHLESS INDIA: A NEW BEGINNING

Introduction: The Indian Economy, post Economic Reforms of 1991 has witnessed drastic growth and development coupled with higher international integration on the global platform. The Indian economy is the seventh largest in the world in terms of nominal GDP and third largest in terms of Purchasing Power Parity (PPP).

Among various other emerging markets, India promises higher investment returns, which can be further attributed to many factors. Now, with the recent demonetization announcement on 8th November 2016, a new road towards a cashless economy has been laid down before India. Looking up to economies like that of Sweden, which leads the race of becoming a cashless economy, a number of challenges lie ahead of India which might hinder its cashless dream. Thus, there is a need to identify these challenges and revaluate policies targeting their removal to make India a cashless state.

The Cashless Dream: The Finance Minister of India in his budget speech of 2016, talked about making India a cashless economy. However, the road towards a cashless society with less than 5% of all payments being transacted electronically is not easy. Also, compared to the other economies of the world, the cash to GDP ratio is high in India. However, the desire for a cashless economy is driven by its perceived advantages and not due to the inconveniences caused in carrying physical cash in India. Further, RBI has set out a plan 60

to encourage India to move towards a cashless economy with its document- “Payments and Settlement Systems in India:Vision 2018”, which revolves around the 5 Cs- Coverage, Convenience, Confidence, and Convergence.

The Need for Cashless Economy: To begin with, a cashless economy would help India to move closer towards financial inclusion, and widen the scope for universal availability of banking services to all its citizens. This would, in turn, improve credit access, benefiting the growth of Small and Medium-sized Enterprises (SMEs) in the medium and long run. Further, it would help to curb black money, and also reduce tax evasion and money laundering instances. It would help to keep a check on fake currency and harmful soiled notes.

Secondly, a cashless system would lead to a reduction in the cost of printing notes, maintaining ATMs and decreasing other social costs. The cost savings in a cashless economy are thus predicted to be around 0.25% of GDP. The cashless economy would also make the banking system more transparent, ensuring efficient delivery of welfare programs and schemes to the targeted people. Thus, there would be efficiency gains as transaction costs across the economy would come down and the entire transaction mechanism would speed up due to increased velocity of money.

Thirdly, the cashless economy promises greater transparency which is required to attract higher capital inflow in terms of FDI and FIIs. Decrease in the inter-

est rates would lead to more lending, thus attracting more foreign investors.

Fourthly, a cashless economy would help Reserve Bank of India (RBI) to efficiently regulate monetary policy. In times of acute deflation, there is a need to increase consumption and investment by reducing interest rates. This would cause most people to hoard their money in the form of physical cash. However, in a cashless economy, hoarding of cash won’t be possible. In cashless societies like that of Europe, Central Banks push interest rates to a negative territory which forces people to spend their money. This helps to increase the consumption, investment, GDP, thus enhancing the effectiveness of the monetary policy.

Lastly, in order to increase the money supply in a digital economy, the government would only have the option of issuing bonds and bills. This would help the government to avoid hyperinflationary episodes, which may arise due to excessive printing of currency.

At the time of economic crisis, when the people lose confidence in the banking system, they withdraw and hold cash in huge amounts. However, a cashless economy eliminates the occurrence of such Bank Runs. Thus, a cashless society would help revive economy much faster at the time of economic crisis.

The Demonetization Move: The Prime Minister announced demonetization on 8th November 2016, primarily to curb Black Money in India. The strategy was to instantly nullify all Rs.500 and Rs.1,000 notes. Then eventually replace them with newly designed, more secure Rs.500 and Rs.2,000 notes. In India, black money refers to the money earned where the income and other taxes are not paid, it differs from the corrupt and illegal money. The amount of black money deposited in foreign banks cannot be accurately estimated. According to the reports of Swiss Bankers Association and Government of Switzerland, this amount totals to the US $2 billion. In addition, to curb black money, demonetization also targets to keep a check on corruption and the fake currency used to finance terrorism. In 2015, India ranked 76th among 168 countries in Transparency International’s Corruption Perceptions Index, which is alarming. A majority of the currency used to transact in Black or Illegal Market is of a higher denomination which adversely affects the economy.

In the year 1946 and 1978, India had witnessed similar demonetization moves. However, the latest one has been specifically targeted towards making India a cashless economy.

Demonetization on the Global Platform: Many countries around the world have already started their journey to become a cashless society. Swe61

den, which transacts only 2% in cash out of its total transactions leads. In most parts of the European and American economies, people have shifted to digital payments involving card payments and smart phones linked to bank accounts. However, history has taught us that demonetization has not always favoured the economy in achieving its cashless dream. Countries like Nigeria, North Korea, and Myanmar have suffered the brunt of demonetization. Thus, a careful roadmap needs to be planned out for India to incentivize people to use mode of digital payment.

After the demonetization move in India, Australia has now hinted to demonetise its $100 banknote to keep a check on tax evasion and the black economy primarily. In the past, Australia had released plastic notes, which did not create any significant impact on its economy. In December 2016, Pakistan had announced replacement of their old notes with the new ones. However, unlike India its citizens had time to exchange these notes as Pakistan had legally issued this tender 18 months back. Demonetization move in India was unanticipated, thus it is expected to impact the economy with greater intensity.

The Impact of Demonetization: According to the IMF World Economic Outlook (April 2016), India is the ninth fastest growing nation in the world with GDP growth rate of 7.336% in 2015. However, there is scepticism about the GDP growth rate figures after Demonetization. There are economists bolstering this move with the belief that demonetization would boost the country’s GDP growth while others predicting dampening of the economic activity which would adversely affect the GDP growth rate.

Informal Sector: The Indian economy is characterized by the existence of large informal sector. . According to the National Sample Survey Organisation (NSSO) in 2009–10, the total employment in the country was around 46.5 crore, out of which 43.7 crore workers were from the unorganized sector. Thus, there existed a large number of financial transactions that were not officially accounted. After demonetization, these unaccounted transactions would be channelized into banking sector which would add to the GDP. It can be predicted that black money transactions would be transacted in white formal sector henceforth, which would help to formalize the informal sector.

Consumption: In the short run, shortage of liquidity would badly affect the consumption and production. This might have chain reaction leading to fall in investment, employment and thus growth. However, the decline in

HOMOECONOMICUS III growth rates is less likely to happen in the long run.

It is anticipated that after the end of the cash crunch, deeper financial integration would boost consumption, production, investment, employment and in turn growth.

Money Supply: It is difficult to predict the exact effect of demonetization on money supply. Many economists have estimated that GDP growth for Oct 2016-March 2017 would decelerate to 0.4% from 6.4% , in the previous six months. This would have a negative effect on the economic activities in the short term, and lead to shrinking of the economy. Further, there is a lack of information on the velocity of money in the informal sector unlike in the formal sector The broad money supply would expand as its velocity is comparatively lower in the informal than the formal sector and vice versa. Thus, there is ambiguity in estimating the exact effect of demonetization on the present money supply.

Interest rates, Inflation and Govt. Revenues: In the short run, reduction in money supply would lower inflation. The new cash inflow into the banking sector and deflationary environment would further lower interest rates. Also, there would be a significant reduction in tax evasions as more people would now come under the scrutiny of the tax department.

The newly taxed money would decrease the budget deficit, which would positively impact the economic growth.

Demonetization and US elections: India’s demonetization and the victory of Republican presidential candidate, Donald Trump sent shock waves around the globe. Both these events led to volatility in domestic as well as global markets. In the following days, the equity market witnessed high volatility due to shortage in the money supply. Multiple sectors like Real estate, financial sector, jewellery, consumer durables and construction material companies would be adversely affected.

Soon after these twin events, there was a pull out

by Foreign Portfolio Investments (FPIs). The day after these events, the BSE Sensex saw a massive loss of 1,300 points. The investors then started moving towards safer investments like gold and bonds. However, in the long run, it can be predicted that greater transparency in cashless India coupled with tax cuts

by Trump would attract the FIIs. Further, it is likely that Trump government would resort to a tightening monetary policy. This would help in reducing the volatility on a global level. In India, RBI might have to adopt an aggressive monetary policy to sync in the changed global environment.

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Earlier, in order to safeguard domestic workforce, Trump had indicated about restricting the entry of foreign labourers in the US. This might severely affect the BPO and IT industry in India. However, with the change in US international policies and Trump’s affinity towards India compared to that of China, it is likely that India might get benefitted in the long run.

The Cashless Road Ahead:

On the negative side:

High Population: India is the world’s second largest populated country after China, which further aggravates the problems of illiteracy, unemployment, and poverty. In 2012, 22% of the Indian population was below the official poverty line, while the illiteracy rate was close to 74.04%. Further, the level of digital literacy is too low, highlighting the need for financial literacy to help India achieve its cashless dream. Problems like these hinder economic progress, thus there is an urgent need to reformulate policies.

Dormant Bank Accounts: Bank accounts play an important role in making financial transactions transparent. In 2013, about 400 million people had a bank account in India. In August 2014, Prime Minister launched the Jan-Dhan Yojana scheme with the goal of opening a bank account for every household. In order to encourage new accounts, the scheme offered attractive features such as zero balances, overdraft facilities and free life insurance. By the end of January 2015, 125 million new bank accounts were opened. Although these accounts were opened through the Jan Dhan Yojana scheme, the problem existed mainly because most of these accounts remained unused. In totality, about 43% bank accounts are dormant in India at present.

Thus the challenge lies not in the opening new bank account for every household, but encouraging people to use it for their daily transactions.

Lack of Telecommunication Infrastructure: One of the most important components for making India cashless is its telecommunication infrastructure.

There is lack of internet connectivity in the remote and rural areas. The payment interface-UPI is still at a very primary stage which cannot handle large volumes of transactions. Further, Smartphones play an important role in the digital payment mechanism, and although the number of mobile users is high in India, the number of Smartphone users is very low. There is a lack of cyber security framework that needs immediate attention to make digital economy safe and sustainable.

On the positive side:

Demography: At present, India is in the latter half of the third stage demographic transition with a population of 1.25 billion. About 65% of Indian population is below the age of 35 years, which can provide the economy with a large workforce. Thus the demographic transition along with higher young population would yield rich demographic dividend and help India grow in the coming years. Further, with higher financial literacy and lower poverty rates, the dream of a cashless economy can become reality. There is need to adequately and efficiently use the human resource of the country and use it as an advantage for economic growth and development.

Developing Infrastructure (Healthcare and Telecommunication): To begin with, services like healthcare can be rendered cashless at the point of delivery. After the 2014 election , the Prime Minister unveiled plans for the National Health Assurance Mission, a Universal Health Care (UHC) system to be provided as a part of the sustainable development goals. Under this system, a defined package of health services would be provided to every citizen of the country. The government would act as a buyer, guarantor and regulator along with public and private sector participation.

There is need to build health financing mechanism into single paid cashless system under the UHC framework right away. Currently, under Digital India mission, the e-Hospital application has been already begun which provides services such as online registration, payment of fees and appointment, online diagnostic reports and enquiring availability of blood online. Online healthcare consultation platforms have witnessed a huge jump in a number of visitors.

It has diverted many people towards telemedicine post demonetization. Thus, it can be said that the cashless revolution has positively impacted the health industry.

Secondly, telecommunications system in India is believed to have great growth potential and is second largest in the world. According to the reports, there are 1058.01 million Telephone subscribers (wireless and landline as of May 2016). Further, Indian telecom operators added about 18.94 million subscribers between March 2010 and March 2011 which is double the rate of China who leads in the category of the number of mobile phone subscribers. Further, mobile teledensity stands close to 82.82% (May 2016) which means that digital payment mechanism can be channelized greatly through mobile phones.

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Government Efforts: The government has already started promotion of cashless transactions by issuing 16.8 crore RuPaY cards with Jan Dhan accounts and mobile wallets. On 1st July 2015, Digital India Program was launched to ensure availability of services to citizens electronically by making the country digitally empowered in technology. It consists of three core components which includes the creation of digital infrastructure, delivery of services digitally and digital literacy. Total investment of Rs.4.5 lakh crore has been already made for delivering the Digital India mission including the cost of National Optical Fibre Network (NOFN). Recently, Unified Payments Interface (UPI) was launched by RBI, which would revolutionize payments systems in India. It matches the Aadhar identification number and the mobile number to make payments. Further, NITI Aayog has announced the launch of the schemes “Lucky Grahak Yojana” and the “Digi- Dhan Vyapar Yojana” to incentivize digital transactions. These schemes include cash awards to consumers and merchants who utilize digital payment instruments for personal consumption expenditures. These steps would indeed help in the smooth transition to a cashless economy.

Goods and Service Tax (GST): Demonetization coupled with the introduction of Goods and Service Tax (GST) by September 2017, would help Indian merchants to digitally signup for the tax number, report sales and submit returns. This would thus encourage business sector to go cashless.

Although demonetization and GST would disrupt the informal economy in the short run, but in the long run, it would positively impact the business and financial system of India. It would boost formalization of the informal sector and widen the tax base.

To Sum Up: “Faceless, Paperless, Cashless” is one of the professed roles of the Digital India Program. The cashless road ahead is not easy but can be accomplished with right infrastructure and policies. To start with, the government should discourage use of physical cash by imposing a limit on cash holdings, abolishing government fees on credit and debit card transactions, providing tax rebates for consumers and merchants adopting electronic payments, charging a penalty on huge amounts of cash withdrawals, and so on. Secondly, there is need to set up an appropriate cyber security framework for safety in digital payment mechanisms. Lastly, it is necessary to promote e-commerce by promoting financial literacy, and by liberalizing Foreign Direct Investment norms in this sector. Although the movement towards a complete

HOMOECONOMICUS III cashless economy would take a long period of time, different trajectories need to be planned right away. Indeed the world is getting flatter and there exists great potential for India to grow as a cashless economy, as a result of this economic revolution.

References: Radhika Iyengar, Both sides of the coin: What top economists think about demonetisation; The Indian Express, http:// indianexpress.com/article/india/india-news-india/both-sides-of-the-coin-what-top-economists-think-about-demonetisation/,; 28 November 2016 Tim Worstall, Absolutely True - Demonetization Will Boost India’s GDP - But How True Is It?, Forbes Asia, http://www.forbes.com/sites/timworstall/2016/12/04/absolutely-true-demonetization-will-boost-indias-gdp-but-how-true-is-it/#499c82a63217, 4 December 2016. Indian 500 and 1000 rupee note demonetisation,Wikipedia- https://en.wikipedia.org/wiki/Indian_500_and_1000_rupee_note_demonetization Ministry of Electronics & Information Technology, Government of India, Digital India- http://digitalindia.gov.in/ The Economic Times, Demonetisation: Online Health Services see surge in traffic, http://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/demonetization-online-health-services-see-surge-in-traffic/articleshow/55577340. cms, 23 November 2016 Tojo Jose, what are impacts of Demonetisation on Indian economy?, http://www.indianeconomy.net/splclassroom/309/what-are-the-impacts-of-demonetisation-on-indian-economy/, 16 November 2016; Anupam Manur, We are trying to become a cashless society-but is that a great idea?, ;http://factordaily.com/digital-payment-cashless-society-good-or-bad/, 15 September 2016

APURVA BENDRE

TRENDS IN

FEMALE WORKFORCE PARTICIPATION

The article examines the recent trends in female work and recent patterns in the participation of womforce participationrate(WPR)in India and elucidates en in different sectors namely agriculture, manthe factors responsible forits low rate. A detailed ufacturing and serviceshave been exhibited.The overview of existing patterns of WPRin India across charts 1A and 1B summarize the trends in secthree major sectors has been presented. The level toral participation of females in rural and urban of education of employed women workforce is one India. An analysis of the data shows that a whopof the factors that determinesthe quality of women ping number of rural women are engaged in agriwork forcebut the periodic surveys inurban and rural cultural activities followed by manufacturing and India reveal a different actuality.It is of utmost imporservice sector.It can be observed that ruralwomtance to consider the determining factorsunderlying en engaged in services sector is marked by an female WPR as these key factors play a vital role in upward trend. reflecting the ongoing trends that would attribute • Sectoral Participation of Women in Rural to realising an all -encompassing demographic diviIndia:Women in rural India are predominantdend. Thus, it is imperative to deal with impediments ly engaged in agriculture where earning opporfaced by the female population and adopt corrective tunities are low.The chart 1A below represents comprehensive approaches to tackle the existing sitthe sectoral classification of employment of rural uation.An amelioration in the qualitative inclusionof women in India. female workers in the workforce has implications CHART 1A beyond economic benefits and is an indication of improvement in the status of women, opportunities in the job sector and decrease in gender inequalities while making hiring decisions.

Overview of Trends in Female WorkForce ParticipationThis section encapsulates thepatterns in thefemale WPRin urban as well as rural India. A quick review of the present scenario has been exhibited with the use of NSSO surveys.

• Sectoral Participation of Women:The past Source:Employment and Unemployment Surveys (EUS), NSSO. 64

The data reveals that there has been a steady decline in the percentage of rural women engaged in agricultural sector from 84.7% (43rd NSSO round) to 74.9% (68th NSSO round). The participation of rural women in the manufacturing sector has increased drastically from 7.5% in the 66th round to 16.7% in the 68th round. A gradual trend of increase in the WPR has been observed in the services sector marked by the upward trend line. The 68th NSSO round recorded an increase in the WPR to 8.3% from 5.7% in the 66th round.

• Sectoral Participation Of Women In Urban IndiaThe chart 1B represents the WPR of the urban women.The proportion of urban women engaged in agriculture has been declining rapidly. The sectoral WPRfor urban women shows an increase of women engaging in manufacturing and service sectors. The participation of urban women workforce in services increased from around 28 % in 43rd round to around 55% in the 68th round.The percentage of urban women engaged in the manufacturing sector remained almost constant up to the 66thround at 27.9% but spiked to 39.3% in the 66thround.

CHART 1B

jasthan, Maharashtra, Tamil Nadu, Andhra Pradesh and Kerala show higher than all-India average participation rates for the urban females.

Source:Employment and Unemployment Surveys (EUS), NSSO.

The trend in these states has continued to show an upward movement till the 68thNSSO round.

Among these states Maharashtra,Tamil Nadu, Andhra Pradesh have the highest WPR of females. The WPRfor Bihar, Assam and Uttar Pradesh have been lower than the national average from 61stNSSO round till the68thNSSO round. It can be noticed that WPR of both rural and urban females declined between 61st and 66th round.Thus, we can summarize that the rise in WPR in case of states like Maharashtra,Tamil Nadu, Andhra Pradesh and Kerala is much more prominentas compared to the other states. The states of Uttar Pradesh, Assam and Bihar have not shown much improvement in WPR.These inter-state disparities across India may be an outcome of different socio-economic factors and endowments.

• Educational Level of Employed Women in India:The level of educational qualifications is often linked to better employment opportunities. This implies that higher level of education ispositively correlated to higher workforce participation. The available survey statistics on male work force participation in Indiacorroborates this finding. However, if we try to analyse the link between female WPRand educational level of employedfemales the trend is somewhat reverse as compared to that of the males. The charts below display the existing pattern of educational levels of women and employment. The chart 2A represents the Educational Level attained by employed women in rural and urban India. The data for the educational level has been classified into sixbroad categories viz. “not literate”, “up to primary”, “middle”, “secondary”, higher secondary”, “diploma” and “graduate and above.”Sectoral distribution for each education level reveals that63% of the rural women with secondary level of ed-

Source:Employment and Unemployment Surveys (EUS), NSSO.

The analysis of the sectoral participation of urban and rural women in India enables us to reach a consensus that rural women have been engaged in occupations related to agricultural sector but this trend is gradually receding after the 55thNSSO round in 1999-2000. This changing scenario could be an outcome ofthe liberalization,privatization and globalization policies adopted by the government earlier in that decade.

• State Wise pattern WPR of FemalesThe table 1 below indicates the urban and rural work force participation rates.A glance at the table enables us to deduce that the WPR of women in urban as well as rural India across states has been subject to a lot fluctuations. Most of the states have experienced a fall in urban female WPR during 66th round, 2009-10. Among the major states Ra65

HOMOECONOMICUS III ucation are still engaged in agricultural activities.

Issues Confronting Women 23% of graduate women are working in agricul- The International Labour Organisation (ILO) attriture/ agriculture related work. butes low WPRto three factors viz. increasing eduCHART 2A cational enrolment, improvement in earnings of male workers that discourageswomen’s economic participationand the lack of employment opportunities at certain levels of skills and qualifications discouraging women to seek work.

• Access to Suitable Jobs Complexity of multiple and interlinked problems relating to access to employment, choice of work, working conditions, employment security, wage parity, discrimination, and balancing the competing burdens of work and family responsibilities languish female parSource:Employment and Unemployment Surveys (EUS), NSSO. ticipation in the workforce. A high percentage of women are engaged in jobs in the informal econThe chart 2A displays that WPR of urban women omy that is characterised by minimal formal prohas declined from around 30.4% in the 61st round to tection where the likelihood of exposure to the 23.1 % in the 66th round. Similarly, WPR of women risk of exploitation is much higher. “Failure to alin the “primary” category is recorded to be 20.6% in low women full access to the labour market is an the 66th round. It can be summarised that the womunder-utilization of human resources that holds en who actually comprise theworkforce belong to back productivity and economic growth,” said the category with the lowest educational qualificaILO economist, Kapsos. Social restrictions on the tions. Thus, it can be implied that women belonging lifestyles of womenand the household responsito these categories may be employed in unskilled and bilities limit their choicesas regards to location of low paying jobs. employment. Hence,their search for employment CHART 2B opportunities is confined to areas near residence.

This explains the dependence of women on informal sector for employment and self-employment.

NSSO Surveyfindings reveal that women’s household workload,mobility and safety concerns are important constraints to their participation.

• Measurement Issues A number of time use surveys (TUS) reveal that women are engaged in activities related to household responsibilities that are not accounted in the National Accounts and Employment surveys across the nation. The use Source:Employment and Unemployment Surveys (EUS), NSSO. of TUShas been advocated in various studies but carrying it out is difficult and cumbersome taking A similar trend was observed in case of the rural into consideration the sample size of regular emWPR in the 66th roundthat is exhibited in chart ployment–unemployment survey (Hirway, 2000).

2B. Around 43.2% of the illiterate rural women areIt is likely thatsurveys underestimate or underemployed, whereas only 18.3% women from the report the female work force participation in a “higher secondary”categoryand 29.7% from the developing country as lesser percentage wom“graduate”categoryare employed. This pattern once en both in urban and rural areas are engaged in again indicates lower participation of educated wompaid economic activities. Absence of an empirical en in the workforce. It is important to understand scientific method to quantify the qualitative prothat only feminization of workforce cannot be related ductive work into monetary terms is one of the to empowerment of women and economic developfactors responsible forunderestimationeconomic ment. The quality and productivity of the workforce contribution of women. comprising women needs to be considered before • Gender DiscriminationWomen face multiple isdrawing inferences. sues in form of equal access, participation and progress in the labour market. The traditional 66

gender roles, the continued undervaluation of role of women as care givers and social prejudice can be compared to a distortion that impedes economic growth.This continues to shape and inhibit labour market opportunities and incentives for women.It is imperative to tackle sectoral and occupational segregation by introducing skill development and training programmes for women and encouragingthem to explorenon-stereotypical fields of study and work.Many women with comparable skills and experience are confronted with a gender wage gap and lag behind men in income and career mobility in the formal sector.

Equal pay for women and men for equal work or work of equal valuehas not yet been fully realized.

Gender discrimination in hiring and promotion at the workplace persists. The difference in wages paid to males and females in urban and rural India is quite evident in the table below:

this gap. Thus,the increasing gender gap needs to be dealt with.

Comprehensive approaches: Feminization of the workforce is not necessarily a sign of improvement of women’s opportunities and position in the economy. It needs to be backed with generation of accessible employment opportunities in urban as well as rural India with emphasis on quality of employment in terms of decent working conditions and health facilities.

A viable panacea lies in fostering varied skill development and specialized training programmes that will not merely aid acceleration of employment creation for women but also contribute to the economic empowerment of women.The window of demographic opportunity has put India into a privileged position for a few more decades. The extent to which India capitalizes on this opportunity depends on how well the workforce is utilized in a gainful way for productive employment. With a growing share of working age population and relatively few dependents, India is in a favourable position and if this is supplemented by a high female WPR then it will exploit the maximum benefits of demographic dividend in an exhaustive manner.

References: 1.Hirway, Indira and Jose, Sunny (2011). Understanding Women’s Work Using Time-Use Statistics: The Case of India. Feminist Economics,Vol. 17, No. 4, pp. 67-92.

2.Klasen, S. and F. Lamanna, 2008, “The Impact of Gender Inequality in Education and Employment on Economic Growth in Developing Countries: Updates and Extensions,” Ibero America Institute for Econ. Research (IAI) Discussion Papers 175, Ibero-America Institute for Economic Research.

3.Mammen, K. and C. Paxson, 2000, “Women’s Work and Economic Development,” The Journal of Economic Perspectives, Vol. 14, No. 4, pp. 141-164.

4.NSSO (2011). Employment and unemployment in India, 2009–10. NSS 66th Round—Key Indicators of employment– unemployment in India 2009–2010 (Report No. 537). New Delhi: 5.Ministry of Statistics and Programme Implementation, Government of India. Retrieved 17 July 2015, http:// mospi.nic.in/ Mospi_New/upload/Key_Indicators_ Emp_&_Unemp_66th_ round.pdf NSSOMinistry of Statistics and Programme Implementation, 2014,NSS Report No. 557: “Informal Sector and Conditions of Employment in India,” Ministry of Statistics and Programme Implementation, Government of India, July.

6.OECD, 2014, Economic Survey of India, Chapter 2, “Raising the economic participation of women in India –a new growth engine?

Source:Employment and Unemployment Surveys (EUS), NSSO.

The tables 2A and 2B display a striking difference between the proportion of difference in wages of males and females in urban areas is similar to that of the rural areas.The average wage of urban males stood at Rs.78.12 in 1993-94 whereas the average wage of urban females was Rs.62.31.This statistics compared to that of the rural areas shows similar trend. This discrimination in wages paid to women in urban areas hiked in the 68throundfrom the 66thround widening 67

HOMOECONOMICUS III “DIYA DEVARE is a consultant at Netpro, freelance writer and part-time educator. An alumnus of Economics Dept. of Mumbai University and has been awarded Sir Currimbhoy Ebrahim Scholarship for Post Graduate Studies, Prof. Usha Kuwalekar Prize for Best Student of the year (Ruia College), Prof. K.P. Sahasrabudhe Memorial Scholarship for Economics (Ruia College) and Diplome from Alliance Francaise de Bombay. She is also a certified market professional (AMFI Advisors, Currency Futures, Commodities and Derivatives Trading), NSE. Instrumental in developing Consumer Sentiment Index, a leading indicator of the business cycles in the Indian economy with Boston Analytics team as an Economic Analyst.

At present, she is pursuing studies at GIPE, Pune. At leisure Diya prefers to read and listen to music.”

MANN KA SATIRE The following poem is my interpretation of how demonitisation has affected our lives and our nation and how I perceive this catch 22 situation.

‘HOMOECONOMICUS’ This term (‘the economic man’) signifies the abstract ideal of a cold, logical individual in calm and continuous pursuit of his or her self interest. She/he knows everything, sees everything and makes learned steps to acquire reasources and wealth ,or reduce work. This term also accepts the primacy of economics in determining how a a society behaves and how social groups originate in social sciences.

Homoeconomicus is an initiative by the students of the Economics Department of Ramnanarain Ruia College, Mumbai. You can find the previous issues on issue.com or physical copies (not for sale) at the college library.

To all of you who got Mitrooed like myself.

I used to ask my dad for a 500 rupee note he would happily give me one or two Now when I ask him, he starts looking for his shoe When the question raises Of whether or not you approve this moove With the nation confused Half of them saying I don’t and the other half saying I do Forecasting the future some are painting the town redYet disdainfully according to others “In the future we are all dead” Frankly speaking I don’t really have any clue There is really nothing much we can all do Save to adjust ourselves to this untitled Waterloo Untill then sadly some might have to stand in queue Waiting for a miracle that would put the entire nation in the right groove.

-AKSHAY NANDAKUMAR 68

SALONI KELKAR

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GAURI IYER

TEAM ARNAV DESHPANDE

HAVAMA ANIS MEMON (DESIGN TEAM)

HOMOECONOMICUS

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OUR SINCEREREST GRATITUDE TO OUR SPONSORS

69

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HOMOECONOMICUS III

HOMOECONOMICUS 2017 VOLUME III 70